Jason Lemkin, thought leader and one of the most prolific bloggers in the SaaS space built SaaStr to what it is practically with singular effort, by bringing compelling content to his readers. He authors a series in SaaStr titled ‘5 interesting things….’
His latest in the series feature Xero an accounting SaaS out of Wellington, New Zealand reinforces something Atlassian did already. It is completely possible to build very successful SaaS businesses from geographies other than North America or Europe. Jason outlines the lessons from Xero for other founders :
- Selling to SMB’s in smaller markets, with dominant market share one can get to $500mn + in ARR
- While US matters, potentially for future growth, it is not everything to get to this point.
- Churn for Xero is at 1.1% from SMB’s. Keeping churn low is key to keeping costs low. So while negative Churn is the best, and several successful companies do manage that, new saas companies should attempt the Xero level of 1.1% [Note: Tomasz Tunguz has written a piece on how the NDR level makes sales efficient and a difference between 110% and 130% is doubling of your sales team. In context, we should look at both these together.]
- Customer LTV is high at 81 months and that is a great news for Xero as it essentially takes 13 months or more to recover its acquisition cost which is in the increase lately.
- While the recovery of CAC is not exactly where you would want it to be and top it with sales assisted SMB sales process ( not so much PLG it seems for new customers ) the LTV/CAC ratio of 6.0 is indeed very healthy.
There are “extras” and as a SaaS founder you would do well to read them all and while at it take a tour of Xero’s site. There is a lot you can learn.
Link to Jason Lemkin’s article : 5 Interesting Learnings from Xero. As It Crosses $650m in ARR. https://bit.ly/2Mc8ZQf
Xero’s full year 2019 financial results https://bit.ly/2VGhsu5
Three Non Obvious Lessons Learned Selling to SMBs with Xero and Friends https://bit.ly/2QcfnVO
