In the 2nd year, you start becoming profitable. Since you never incur sales & marketing expense again to acquire the customer, the only cost in any SaaS business is just the “cost of sales”. In fiscal 2018 and 2019, the 2017 Cohort represented $14.2 million and $17.3 million, respectively, in revenue billed to these customers and $3.9 million and $4.2 million, respectively, in estimated costs related to retaining and expanding these customers, representing a computed contribution margin of 73% and 76%, respectively.
Payback is fast. According to Bill.com, “for customers acquired during fiscal 2018, the average payback period was approximately five quarters.” Good SaaS businesses recover the cost of acquiring the customer within 1.5 years.
sammy@blossomstreetventures.com
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