Reasons Traditional SaaS Models Are Struggling

The SaaS apocalypse is here. That’s not Linkedin hyperbole. This is based on new data from 50+ public SaaS companies. In the last 3 years, they have lost 50% of growth and CAC has grown by 60%. Here’s why the Old Unicorns are dying and what comes next: BACKGROUND The COVID era venture funding created the illusion of endless SaaS expansion. The hangover has now arrived. Thanks to research from Winning by Design and David Spitz on Top 50 public SaaS companies, growth has dropped from 36% (2021) to 16% (2024). In the same time CAC has grown by 60%. I have been warning about this moment for the last 12 months. Now I finally have data to back it... Unfortunately, I'm afraid it's only going to get worse for many vendors. But a few will find ways to rise above this noise.   WHAT SHOULD YOU DO ? If you are a SaaS entrepreneur, here are a few vectors you need to consider : 1. Differentiate or Die There will be 2x more vendors in every category within 18 months. Your product will get drowned in noise unless you know how to capture attention and differentiate. 2. A great product will no longer help you survive There’s going to be a product parity where all products in a category begin to look the same. Real differentiation will come from brand, narrative, thought leadership, GTM innovations and community. 3. Premium vendors need to prepare themselves for change TAM is more or less flat but vendor count is exploding. This means revenue/vendor will shrink and will lead to increased competition. Expect downward pricing pressures and longer sales cycles. Brand premium will have to be re-earned every quarter.  4. GTM teams will become the power centers Product and Engineering are important but in the future, without strong GTM, rising CAC will destroy companies. GTM innovations will be key to survival. 5. Venture returns and Exits will get Weird Winner takes all models are under threat and hence growth at all cost may not make sense for all portcos. We will see a wider gap in venture outcomes - fewer breakthrough successes, many more failures and success will come in the form of creative, weird and opportunistic exits. 6. Time for outcome based pricing is NOW As seat revenues drop and commoditize, there will be a landgrab around outcome based pricing and long term contracts. This is no longer optional but key to long term survival. 7. Endpoint solution will fade away Eventually no buyer or seller will be able to afford high CAC for a tool that does only one thing well. The race will switch to becoming a platform or plugging into one. New vertical stacks and platforms will emerge, spots will be scarce and early adopters will capture an outsized share of the rewards. CONCLUSION The growth engine of last decade is already broken. Rearchitect your GTM for the future or prepare for your business to get harder every quarter.

In 2021, his SaaS playbook drove $50M ARR: cold email + paid ads + SDR. In 2024, same playbook = $3M burned, $180K ARR. Markets changed. He didn't: I’ve spent a weeks analyzing 147 SaaS companies that launched between 2020-2024. Patterns are brutal. Companies that raised in 2021-2022 are dying faster than those that bootstrapped. Why? They optimized for a world that no longer exists. Cheap money created fake growth signals. $0.50 CAC made any strategy look brilliant. 2% interest rates made investors throw money at anything with "SaaS" in the pitch deck. Now reality hit. CAC is $15 where it used to be $2. LTV calculations were based on customers who never should have bought. Growth tactics that worked with infinite runway don't work with 18 months left. But here's what nobody talks about: The companies surviving changed their entire theory of business. Instead of growth-at-all-costs, they built sustainable engines. Rather than hiring ahead of revenue, they stayed profitable. And they focused on customer cash flow. I'm watching two types of SaaS companies right now: Type 1: Still playing 2021 rules - Burning cash on paid ads that don't convert - Cold emailing enterprise buyers who've gone dark - Hiring sales teams for markets that aren't buying - Chasing vanity metrics that don't pay bills Type 2: Playing 2025 rules - Building products people actually recommend - Targeting markets that still have money - Using personal brand instead of spray-and-pray - Measuring cash flow, not growth rate Type 1 companies have 6-18 months left. Type 2 companies are buying Type 1's assets at fire sales. Most founders know their strategies aren't working. They just don't know what to do instead. So they double down on broken playbooks. Hire more salespeople for campaigns that don't work. Spend more on ads that don't convert. Raise bridge rounds to fund strategies that are bleeding money. Markets didn't get "harder." Markets got honest. Fake growth disappeared. Real business fundamentals matter again. Customer acquisition has to make economic sense. Companies that built real businesses are thriving.

The worst advice in SaaS isn't new. It's the old advice still costing founders millions. In 2025, it’s frustrating to see B2B SaaS startups still crippled by the same outdated advice that has led to countless failures. While the landscape evolves rapidly, some fundamental missteps persist, often masked by the allure of "hyper-growth" or investor FOMO. As we guide vendors on Software Finder and analyze market trends, these patterns become painfully clear. The most detrimental advice I still see being followed includes: 1. "Launch Fast" Over Product-Market Fit The MVP concept has been distorted. Rushing a product to market without deeply validating core customer needs is a recipe for wasted resources and negative feedback.  We see vendors on our platform struggle when their offering doesn't clearly solve a problem for a targeted audience, regardless of how quickly it was launched. 2. Over-Reliance on Early-Stage Funding Raising massive capital without a clear path to profitability isn't a badge of honor; it's often a ticking time bomb. The focus should be on building a sustainable business model that generates revenue. Software Finder emphasizes connecting businesses with solutions that demonstrate tangible value, which inherently means a viable underlying business model. 3. Neglecting Profitability for Unsustainable Growth: Chasing top-line revenue at the expense of profitability is fatal in any economic climate. Investors are scrutinizing burn rates more than ever, demanding a clear path to sustainable unit economics. Our insights from working with hundreds of software providers consistently show that long-term success isn't about growth at all costs, but about disciplined, profitable expansion. 4. Assuming Scalability Without Validation B2B SaaS is inherently scalable, but that doesn't mean it’s effortless. Underestimating the operational, support, and infrastructure demands of a growing customer base leads to critical bottlenecks. 5. Ignoring Customer Success: High churn negates new customer acquisition efforts. Retention and long-term value are paramount for sustainable growth. A focus on acquiring new customers without retaining existing ones is a negative growth cycle. At Software Finder, our mission is to bring clarity and trust to the software discovery process. This extends to how we advise vendors: focus on delivering undeniable value, achieve true product-market fit, and build a sustainable business model that prioritizes profitability alongside growth. Hype fades, but a solid foundation endures.

“Wait, isn’t all our revenue accrual-based?” That’s what a SaaS founder said during a recent review. And yes, on paper, it looked like they were. But once we opened the books? Nothing matched. ❌ Revenue was not deferred and segmented ❌ No logic alignment to actual service delivery ❌ No COGS / Cost of Revenue recognized ❌ No accrued expenses Turns out, it was not accrued based accounting.. This was a pure vanilla B2B SaaS business model with monthly and annual subscriptions. Here’s what was actually happening: – Revenue was booked when cash came in (not when value was delivered) – Accounting agency set up a generic chart of accounts with zero SaaS context in QBO or Xero – MRR was stitched together with 4 different tools (none reconciled) – No understanding of retention by segment, plan, or geography – Forecasting based on hope, not historical data or trends The result? → Stalled ARR growth → Inflated revenue metrics → Broken investor reporting → Poor decision-making on pricing, hiring, and runway → Immediate red flags during due diligence This is a fundamental issue, not a pricing one. If your finance foundation is not set for success, it doesn’t matter if you are profitable on paper, you will always doubt the numbers. Even simple SaaS models need: ✅ A chart of accounts built for SaaS (not e-commerce or services) ✅ Revenue recognition that follows ASC 606, mapped to performance ✅ Segmented reporting (MRR, churn, LTV, CAC) by product, cohort, or geography ✅ Tooling consolidation—one source of truth, not five conflicting ones ✅ Forecasting driven by patterns and actual behavior, not just “last month x 12” And as Warren Buffett once said: “The more you understand your numbers, the less you have to fear them.”

The Growth-at-all-Cost (GaaC) mindset is finally dying. The past 10-20 years, SaaS has been about top line growth. Companies have spent 80-90% of their capital on sales and marketing. This meant they weren't spending enough on their product. This worked historically because SaaS was new and it was easy to provide a better solution than something on-prem, analog, or manual. Today the competition is fierce and it's no longer about beating on-prem, analog, or manual solutions; it's about beating an entire category of SaaS solutions (in most cases). This means the first iteration of a SaaS product is rarely strong enough to scale a full sales and marketing team today. By time you sell your first batch of customers and raise a decent seed round of funding, there's already competition. Once you raise that round of funding you've committed to tremendous revenue growth numbers. Now sales and marketing become the priority and the product takes a back seat, both operationally and financially. At this point, potential competitors realized if they enter the same space and raise twice as much as you, they can move faster. That race for growth burns capital while slowly evolving products, leaving smarter competitors with the advantage, and that's what's changing today. Smarter competitors today are sitting in the background developing stronger products. They'll come to market once their product is unbeatable. These products are so strong that they require much less sales and marketing support, because they took more time and effort to develop. That's the trend that's killing the Growth-at-all-Cost mindset in SaaS. Finally.

SaaS As We Knew It Is Dead, But It's Evolving With AI Agents. Here's Why: The SaaS model that dominated business for two decades is ending. CRM systems, once the flagship of this revolution, are the first casualties. 👉 Why Vertical Silos No Longer Work Businesses invested millions in SaaS platforms promising a "360-degree customer view," but delivered only isolated data repositories. Traditional CRM has become a corporate data prison: • Systems only specialists can navigate • Customer data locked in proprietary systems • Inflexible workflows forcing businesses to adapt to the software • Costly integrations between platforms 👉 The Real Shift: AI Changes Everything Artificial intelligence now enables a cross-functional layer previously impossible. What matters most is access to high-quality data with minimal intermediaries. For established SaaS vendors, their interfaces are becoming barriers rather than enablers. 👉 Horizontal Architecture Replaces Vertical Solutions Companies are applying AI directly to primary data stores because this approach is: • More cost-effective • Higher fidelity • Lower risk • More powerful 👉 Bottom-Up Instead of Top-Down The new paradigm builds intelligence from the ground up, starting with core data. Users don't want complex screens—they want to ask, "Show me which deals need attention" or "Set up meetings with inactive customers." 👉 Data Platforms Will Outpace Applications Winners won't be those with slickest interfaces, but those who: • Structure data to be accessible • Build AI capabilities that interact directly with data • Provide open APIs for leveraging intelligence 👉 This Transformation Is Already Happening This isn't the future—it's now. User accounts remain active, but feature usage is declining. Teams are choosing AI assistants over complex CRMs. Companies build custom solutions in days instead of months. The specialized knowledge SaaS companies once monopolized is available to anyone with an AI assistant. The data oligarchies are crumbling—good news for everyone except SaaS giants unable to adapt. What do you think? Is traditional SaaS dying, or does it still have life left? ~ Follow Wendy Turner-Williams for more ✅ Repost if this resonated with you ♻️

In my customer conversations the No. 1 problem I hear these days is that it’s getting harder to grow SaaS businesses. Organizations are struggling with retention and expansion because of shrinking budgets and increased scrutiny by CFOs. Customers are no longer willing to buy seats “just in case” their employees need access to the product. To add insult to injury, layoffs mean there’s fewer seats needed. There are many things SaaS vendors can do to fix this, such as better qualification, or making sure they’re delivering value and improving onboarding. But the one thing I keep reminding CEOs and Founders, is to double down on API plans and promote usage of their product vs. relying on per-seat revenue - here’s why: - Enterprise processes are often headless, and would be better served by automated integrations and agentic workflows powered by APIs - Integrations run in the background and provide value to users without necessitating interaction. A consumption model makes sense here, rather than a per-seat license - API Integrations, once set up and running (yes you need to secure them and monitor them too), will generally be sticky and not be subject to displacement So, consider augmenting your per-seat licensing with a consumption model and make sure you have a solid API monetization strategy to boost your net revenue retention. Please chime in in the comments if you’re already doing this and have seen results or can recommend best practices. #APIs #SaaS #Revenue

Your SaaS company isn't failing because of bad technology. It's failing because you're still thinking like a consulting firm. I get this question a lot from product managers at companies that transitioned from custom development to SaaS. They're drowning in feature requests, building dozens of product variations each quarter, and wondering why their margins are terrible. Here's the thing: you can't scale a SaaS business by saying yes to every client request. That's not product strategy, that's just expensive custom development with a subscription model. I worked with a company facing this exact problem. They had acquired a SaaS product but kept treating it like their old consulting business. Every quarter brought new "must-have" features from different clients. No roadmap, no focus, just feature after feature. The solution? Show leadership what this approach actually costs them. I helped them categorize their backlog into four buckets: 1. Strategic initiatives (aligned with product vision) 2. Customer requests (sales debt that doesn't scale) 3. Bugs and maintenance 4. Tech debt Then we calculated the real cost and margin impact of each category. The numbers were eye-opening. All those custom requests? They were bleeding money while preventing the company from building anything that could scale. The key is presenting leadership with two clear paths: stay in consulting mode with lower margins and endless customization, or embrace true product thinking with scalable features that serve multiple customers. Once they saw the math, the choice became obvious. We shifted 70% of development resources to strategic initiatives, established clear criteria for customer requests, and started charging premium fees for any custom work. The result? Better margins, cleaner codebase, and a product that actually scales. Is your company stuck in consulting mode? What's holding you back from making the shift?

SaaS growth halved, old playbooks obsolete: It's Not Art, It's Revenue Architecture and GTM Engineering. Unless you are AI-native or have hyper (often vertical) product-market-fit, the era of "Growth at All Costs" is dead for SaaS. The numbers don't lie: Public SaaS growth rates have been cut in half, falling from a robust 38% in 2019 to a meager 16% in 2024 – the lowest in a decade. We can argue that these same public SaaS companies are potentially losing product-market-fit. Meanwhile, the cost of acquiring net new annual recurring revenue (ARR) for these companies has increased 60%, from $1.24 to $1.98 over the same period. This means many companies are burning over $2 to acquire $1 of ARR, an unsustainable trajectory in a market no longer flush with blitzscaling / growth-at-all-costs / ZIRP easy money. For those non-native AI solutions, the inadequacy of traditional (hire and train a bunch of new AEs) GTM growth playbooks, obsessed solely with new customer acquisition, which ignored retention and expansion, are now broken. These legacy GTM playbooks leave companies ill-prepared for the more sustainable profitable efficient growth market shift. So what do we do about this? It's time to adopt "Revenue Architecture" for engineered growth. This means treating revenue generation like a "Lean Revenue Factory," a disciplined, science-driven system with predictable processes, metrics, and continuous improvement. This involves integrating every aspect of your GTM into a cohesive blueprint for scaling revenue efficiently, a recurring revenue operating model. Successfully architected companies can achieve growth that is faster, more efficient, and more resilient. It means potentially needing less capital to scale, or being able to outlast competitors who are less optimized. We recommend treating revenue generation as a science and engineering problem, not an art or role of the dice. What are you seeing with the transition to operating in a more capital efficient market environment? Have you found capital constraints boosting efficiency? Thank you David Spitz, Jacco van der Kooij, and Winning by Design for crunching the numbers and the initial mention. #RevenueArchitecture #GTMengineer #WinningbyDesign

The Great SaaS Slowdown: A Myth of Choice 📉📈 Companies didn't choose profitability over growth in public SaaS—the market forced their hand. At first blush, it appears like a calculated tradeoff: - 2019 benchmark: 34% growth with 4% Free Cash Flow margins - Last year: 16% growth with 18% margins - Rule of 40 hovering in the mid-30s throughout But this trade-off narrative is merely a convenient interpretation. The inconvenient truth is that for most of these companies, the shrinking growth rate was thrust upon them due to slowing demand, increased churn, longer sales cycles, declining close rates, and more. The market willed it upon them. How do I know this? All these companies know that in the public markets they are much more generously rewarded for growth than for profitability—as long as the growth is efficient. And efficiency needs to be achieved not just in Free Cash Flow but also in GTM. The GTM efficiency right now is terrible for most. Much worse than 5 years ago (I will link to this data in the comments). As for the public markets valuing growth much more than profitability? Even in the darkest times, it's pretty rare to see "Rule of 40" be a good predictor of valuations. Growth alone is almost always a better predictor. And if you want to factor in some element of profitable growth, you typically need to double your weighting of growth over profitability (see "Rule of X"). So what's it all mean? My friend Tomasz Tunguz commented on one of my recent posts saying perhaps we're entering the Utility Age of SaaS—where these companies become "cash cows," looking more like mature public utilities. Certainly true for some. I think leaders will need to decide: Either: (1) If high-growth is just not an option, then take the "utility" path (better to do under PE ownership, which will have more flexibility cutting costs and leveraging up); or (2) If you can, fix growth and fix GTM. If you're a candidate for 25%+ growth with efficient GTM strategies, you can stay public and reap the benefits—since public valuations ramp considerably with these higher growth rates. #SaaS #Metrics #Benchmarks #GTM