5 Software Industry Benchmarks November 2014

material minds

1 Public Software Companies

We  studied  public  so.ware  companies  from  $10  million  to  $100  billion  in  revenue.  

340 Companies in

the study

Public Software Companies

They  run  the  gamut  from  growing  profitable  firms  to  ones  on  the  decline  

The ones under $100 million were only able to grow at 10%

2 Revenue Growth

Public Software Companies

Forget  the  losers,  the  ones  that  grew,  actually  grew  at  18%  last  year.  

8% Average Growth

Your  growth  rate  depends  on  Sales  and  Marke?ng   Quar?le   S&M  as  a  %  of  

Revenue  Revenue  Growth  

Top  quarAle   55%   45%  2nd  quarAle   33%   20%  3rd  quarAle   27%   11%  BoIom  quarAle   25%   5%  

High  growth  means  more  capital  

If  you  grow  fast,  be  prepared  to  lose  money  

How  about  the  big  guys?  

The  op?mal  rate  of  growth  for  profitability  is  8%  -­‐  12%  as  this  produces  profit  of  10%  of  revenue.  

3 Revenue per Employee

Public Software Companies

For  companies  under  $100  million  revenue,  the  average  was  $240,000  

$331,000 Average

Revenue per Employee

Revenue  per  Employee  directly  impacts  profits  

And  also  impacts  Return  on  Equity  

The  threshold  Revenue  per  Employee  seems  to  be  $350,000.  What  should  you  aim  for?  

How  about  the  big  guys?  

4 Sales and Marketing Spending

Public Software Companies

And  that  computes  to  54%  of  Gross  Profit.  

34%

Sales and marketing as a %

of revenue

How  much  you  spend  on  S&M  ?es  directly  to  growth  in  revenue  

But  spending  too  much  or  too  liVle  is  disastrous  

For  op?mal  profitability  you  should  be  spending  27%  of  revenue  on  sales  and  

marke?ng  

The  average  firm  is  spending  2.4  ?mes  as  much  on  Sales  and  Marke?ng  as  they  do  

on  Research  and  Development  

Sales  and  Marke?ng  is  much  bigger  than  R&D  

How  about  the  big  guys?  

5 Capital Required

But  if  you’re  profitable  that  drops  to  154%  

235% Equity as a % of Revenue

Public Software Companies

The  faster  you  grow,  the  more  capital  you  need  

How  about  the  big  guys?  

material minds

Helping companies execute strategy better by connecting strategy with the daily action of all employees.

Charles Plant 416 458 4850 cplant (at) materialminds.com

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