Question: What makes up a successful SaaS business?

Answer: Customer acquisition, customer retention, and customer growth.

There’s not much else. You can make an argument for healthy margins…but profitability is not a hallmark of a successful SaaS business. In 2014, only 11% of Tech IPOs were comprised of profitable companies. Out of 127 Tech IPOs, 14 were profitable.

Unanimously, the pace of customer acquisition, percentage of customers retained, and the dollars earned from existing customers (expansion MRR), determine success.

David Skok, General Partner at Matrix Partners, publishes extensively on SaaS metrics that matter. He highlights the true gem of SaaS success: Negative churn. This happens when the additional revenue you bring in via cross-sell/upsell exceeds the revenue you lose to churn.