The private U.S. software industry is experiencing its biggest revenue gains since the recession, and both private and public companies are renewing their focus on investment in order to gear up for further growth.
The 2014 Software & SaaS Financial Benchmarking Report is produced by SIIA partner OPEXEngine, the leading aggregator of financial and operating benchmarks for small- and mid-sized software companies. To complete this eighth annual report, OPEXEngine surveyed several hundred private and public U.S. firms with revenues between $1 million and $450 million, with a focus on Software-as-a-Service (SaaS) metrics.
The report, which benchmarks 2013 financials and operating metrics, finds that median revenue for private software firms rose almost 42 percent year over year – the highest percentage increase since the 2008 recession, and almost 40 percent higher than last year’s revenue growth rate of 30.5 percent. Revenue for all public companies included in the survey rose an average of 18 percent in 2013, while revenue growth for public SaaS companies averaged almost 30 percent.
This year’s study also indicates that private and public firms – encouraged by revenue growth – felt confident about increasing spending over current revenues, and were investing in operations and hiring to drive further growth. See table below for more detail.
|Private Companies||Public Companies|
|Year-over-Year Revenue Growth||21%||27.8%||37.4%||30.5%||41.7%||12%||22%||37.5%||21.9%||18.3%|
Further demonstrating this focus on investment, both private and public companies have budgeted to add jobs this year. Private firms plan to increase employee headcount by 26 percent (a 3.5 percent increase over 2013 plans) by the end of 2014, while public companies project a nearly 27 percent gain in 2014 headcount.
OPEXEngine also compares software firms in different geographic regions and finds that median revenue growth for private East and West Coast firms is twice that of private companies in the Central and Mountain regions. At the same time, average operating income for private firms in the Central and Mountain regions is positive (by nearly 3 percent), whereas private firms based on the East and West Coast had operating losses of median 34 percent and 27 percent, respectively.
Other key findings from the 2014 Software Benchmarking Industry Report include:
- Median revenue growth for private East and West Coast firms is 51-53 percent, compared to an average of 25 percent for firms in the Central and Mountain regions.
- Median sales and marketing spending for West Coast firms is highest among the regions at 65 percent of revenue. Comparatively, East coast firms spent a median of 51 percent on sales and marketing, while Central and Mountain region firms benchmark at a median 33 percent in sales and marketing.
- West Coast private firms utilize the most venture funding, at a median of $65 million. East Coast firms follow, accepting a median of $23 million in venture funding, while firms in the Central and Mountain region access a median of $6.8 million in venture funding.
The 2014 Software & SaaS Financial Benchmarking Industry Report provides extensive financial and operating metrics for U.S.-based companies with 2013 revenues of between $1 million and $450 million. Benchmarks cover key financials, including detailed expense ratios, revenue and profit metrics, geographic break-outs, employee statistics, as well as customer and sales model comparisons. The report also looks specifically at Software-as-a-Service (SaaS) vendors and breaks out all the benchmarks for smaller, private companies as well as for larger, public, companies.
Rhianna Collier is VP for the Software Division at SIIA. Follow the Software team on Twitter at @SIIASoftware.