Metrics Reveal Strong Unit Economics on New Customer Acquisitions
GAINESVILLE, FL — April 26, 2017 — SharpSpring, Inc. (NASDAQ: SHSP), a global provider of cloud-based marketing technologies, today reported strong customer acquisition and lifetime value metrics, demonstrating the success of its SaaS business compared to industry standards.
|Lifetime Value (LTV)||$20,500|
|Customer Acquisition Cost (CAC)||$6,000|
|Net Recurring Revenue Churn||-1.7%|
“It is gratifying to know we have built a business that is performing amongst the best SaaS businesses in world. Our achieved 3.4 LTV/CAC ratio is an indicator of the capital efficiency of SharpSpring’s marketing spend, the strength of our sales process, and how pleased our customers are with our service once they join” said company CEO Rick Carlson. “We have continued to acquire customers at extremely attractive rates and we keep those customers over the long haul leading to high value relationships that generate long-term shareholder value.”
During the first quarter, our customer acquisition cost (CAC) has averaged $6,000 for each new customer. CAC calculates our total cost to acquire a new customer and is calculated by taking the prior quarter spend divided by the number of customers acquired in the current quarter to account for the sales cycle timeline.
The lifetime value (LTV) of each new customer added in Q1 is estimated to be $20,500. LTV includes the estimated value each customer will generate for the company, after taking into account estimated costs to support those revenues, customer expansion revenue, and customer churn. SharpSpring’s LTV is based on a beginning MRR of approximately $500, incremental gross margin of 75%, and net recurring revenue churn of -1.7% per month. While already very low, net MRR churn is expected to improve further as our customer base ages and as agency partners continue to add more clients.
According to SaaS experts, the best SaaS businesses have a ratio of LTV to CAC above 3.0x. As shown by this data, SharpSpring’s LTV to CAC ratio was 3.4x in Q1, showing a very healthy long-term expected return on acquired customers.
“We have been very successful building our business in ways that ensure future success for the company,” added Carlson. “We continue to make dramatic improvements to our product, including releasing additional features and partnering with other leading technology providers, which we believe will help secure new customers, increase adoption and reduce attrition in the future, all of which will have a positive impact on these key metrics. While we are excited about improving on these numbers, even our current levels indicate our business fundamentals are exceptional and encourage us to continue investing in sales and marketing and product development to accelerate future growth.”
SaaS Metric Definitions
- Customer Acquisition Cost (CAC): All sales and marketing costs, including resource costs and marketing program spend, from the prior quarter divided by the number of new customer acquisitions from the current quarter.
- Lifetime Value (LTV): Beginning monthly recurring revenue (MRR) value for new customers multiplied by expected incremental gross margin divided by the expected net revenue churn rate.
- Net Revenue Churn: The sum of customer revenue attrition, customer expansion and customer contraction divided by the beginning MRR for the period.
About SharpSpring, Inc.
SharpSpring, Inc. (NASDAQ: SHSP) is a rapidly growing, global provider of cloud-based marketing automation solutions that enable businesses to improve lead generation and engagement to drive more sales. The company’s product lines, which include SharpSpring and SharpSpring Mail+, are known for their innovation, flexible architecture, ease of use, and cost-effectiveness — all backed by high-quality customer support. Learn more at www.sharpspring.com.
Important Cautions Regarding Forward-Looking Statements
The information posted in this release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements by use of the words “may,” “will,” “should,” “plans,” “explores,” “expects,” “anticipates,” “continues,” “estimates,” “projects,” “intends,” and similar expressions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. These risks and uncertainties include, but are not limited to, general economic and business conditions, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in completing new customer offerings, changes in customer order patterns, changes in customer offering mix, continued success in technological advances and delivering technological innovations, our ability to successfully utilize our cash to develop current and future products, delays due to issues with outsourced service providers, those events and factors described by us in Item 1. A “Risk Factors” in our most recent Form 10-K and other risks to which our Company is subject, and various other factors beyond the Company’s control. Except to the extent required by law, the Company undertakes no obligation to update or revise (publicly or otherwise) any forward-looking statements to reflect subsequent events, new information or future circumstances.
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