🏴☠️ ⚡️ Benchmark Your SaaS Firm with a Few Prompts (Operating Concept)
Acquiring and scaling niche Vertical B2B SaaS firms in public 🏴☠️⚡️ —Join us every Saturday morning for value creation playbooks, operating concepts, acquisition strategies, deal analysis and more..
TABLE OF CONTENTS:
Benchmarking = Value Creation Roadmap
Key Metrics & Benchmarks
Benchmarking your P&L / Forecast with a Few Prompts
An Example Output
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📻 LISTEN:
We believe benchmarking isn’t just an analytical exercise—it’s a roadmap for transformation and value creation. Think of it like a fitness assessment with a trainer: where they measure your strength across a range of exercises and compare your results to your peer group to then craft a highly tailored fitness and nutrition plan based on your strengths and weaknesses.
The most important concept is establishing a point of view that is RELATIVE to your peer group, so you’re clear on areas of under / overperformance to inform a prescriptive and data-driven game plan accordingly.
By comparing key metrics like gross margins, operating expenses, and customer acquisition costs against industry standards, we gain a precise understanding of a company’s strengths and areas for improvement. This approach allows us to identify inefficiencies, uncover growth opportunities, and craft actionable strategies to optimize performance. Whether we’re evaluating a target acquisition or building a value creation plan, benchmarking provides the clarity needed to make data-driven decisions and prioritize impactful changes.
Historically, this was a pretty painful exercise, though today, it’s just a few prompts away…
Let’s dive in!
Key Metrics & Benchmarks
Here’s a look at SaaS Capital’s 2024 Benchmarking Metrics for Bootstrapped SaaS Companies (derived via survey of 1.5k Firms):
We won’t spend time breaking down the respective metrics in this post. The important thing to note is most are rates or ratios (aka percentages), with the 50th percentile being average for $3M to $20M ARR firms.
Now, on to the good stuff.
Benchmarking your P&L / Forecast with a Few Prompts
Pick your favorite LLM and kick off with the following prompt: (copy and paste the table above into the chat window) “Please digest the attached image providing benchmarks across a range of metrics for Bootstrapped SaaS businesses”
Once the LLM confirms comprehension: “Excellent! I'd now like to share a copy of the [P&L / Forecast] for our bootstrapped SaaS firm. From there, I’d like you to provide a summary of our performance metrics and ratios. After that, I'd like you to compare our respective metrics and ratios against the benchmarks I just provided. Sound good?”
Go copy your P&L / Forecast and drop it into the chat window…
An Example Output
Let’s now benchmark the forecasted ratios (2025–2029) against the industry benchmarks provided in the image. Below is an analysis comparing each key ratio:
1. Revenue Growth Rate
Forecast (2025-2029): Revenue growth rates are the following:
- 2025 to 2026: 41.3%
- 2026 to 2027: 53.9%
- 2027 to 2028: 33.9%
- 2028 to 2029: 29.8%
Analysis: The forecast growth rates mostly hover between the 50th and 75th percentile, suggesting a healthy growth trajectory, particularly between 2026 and 2027 (53.9%).
2. Hosting Expenses (as % of Revenue)
Forecast: The forecast shows hosting costs between 5.2% and 5.6%.
Analysis: The hosting expenses align closely with the 50th percentile. This seems appropriate and competitive for the size and forecast of the business.
3. Support Expenses (as % of Revenue)
Forecast: Support expenses range from 11.0% to 11.7%.
Analysis: This places support expenses just above the 50th percentile, indicating that support is well-staffed but still reasonably efficient. There is room for optimization, but it's not alarmingly high.
4. Sales & Marketing Expenses (as % of Revenue)
Forecast: Ranges from 12.0% to 17.3%.
Analysis: These expenses mostly align with the 50th percentile, suggesting a well-managed sales and marketing budget relative to revenue. There’s a balance between maintaining customer acquisition efforts and not overspending.
5. Engineering & Product Expenses (as % of Revenue)
Forecast: 21.0% in 2025, decreasing to 14.6% by 2029.
Analysis: Starting between the 25th and 50th percentile, engineering, and product costs decrease to just below the 25th percentile, indicating increasing efficiency in product development and engineering over time. This could be due to reaching product maturity.
6. General & Admin Expenses (as % of Revenue)
Forecast: Decreasing from 18.9% to 9.8%.
Analysis: G&A costs are initially around the 50th percentile but decrease to below the 25th percentile by 2029, reflecting strong operational improvements and administrative efficiency as the company scales or transitions from transformation to steady-state.
7. EBITDA Margin
Forecast: 31.6% to 34.4%.
Analysis: The EBITDA margin steadily improves and aligns with the 75th percentile throughout the forecast period, indicating a solid profitability profile. This shows that the company is on track to achieve a high level of operational leverage and profitability as it grows.
Summary Insights:
Strengths: The forecast shows strong EBITDA margin, gross margins, and well-managed sales and marketing and engineering costs. The decrease in G&A expenses over time is a significant positive, indicating increasing efficiency.
Opportunities for Improvement: Support expenses are slightly above the median but not overly concerning. This could signal a strategic decision to over-invest in Support and Customer Success, given the critical impact of retention in recurring revenue businesses.
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