Vertical SaaS killed it in GTM in 2023! 😂
At least, compared to the rest of the SaaS world.
No matter how you slice it…
Just 22% of revenues spent on sales & marketing – compared with 41% for everyone else (medians).
… and the more telling GTM Spend Ratio: $1.76 spent for every $1 of Net New ARR (vs. $2.40 for everyone else)
Stealing from my “Ode to Vertical SaaS” from a post last fall….
"People used to shy away from vertical software. They said too niche-y. Limited TAM. Well, one person’s niche is another's private GOLDMINE. You see, with great products that solve a vertical’s problems and a critical mass of happy customers, you can build an amazing business in vertical SaaS. The best part? GTM network effects! Your customers become your marketing & sales engine. It’s GTM on steroids. Highly efficient."
Some other nuggets from the 2023 data:
- Growth rates – vertical vs. everyone else – were virtually the same at 17%-18%
- Other operating cost margins (R&D and G&A) were also indistinguishable
- But gross margins for Vertical SaaS were lower – since many offer attached, lower-margin services
This lower GM point is important.
The obvious question: Does this negate the GTM advantages?
To answer this, I came up with a (admittedly contrived) “GM-effected Payback”* metric. (I usually loathe complicated, compound metrics. But I felt it was helpful here as it captures the tradeoffs).
The result – 29 months for Vertical SaaS vs. 38 for everyone else – clearly shows the superior GTM economics for vertical, even accounting for lower GMs.
(NB: Be careful calling this actual payback since it incorporates churn and therefore overestimates the real payback period).
If you’re a fan of vertical SaaS I encourage you to look at the work of David Yuan and his team at Tidemark. They should have some private company vertical SaaS benchmarks soon.
#SaaS #metrics #benchmarks #vertical
