Saas Company

How Profitable Is A Saas Company? (Updated for 2024)

Pat Walls

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Updated: October 8th, 2024

How Profitable Is A Saas Company? (Updated for 2024)

So you want to start a saas company?

And the first question that came to your mind was, “well, are saas companies actually profitable?”

With a market size of $581B - there’s plenty of business to go around.

Especially considering:

You could start a saas company with as low as $1
Based on our data, saas companies generate an average of $3.94M per year
You could see gross margins as high as 95% with saas companies

There’s money to be made. Don’t worry.

But, I don't want to spoil it all. Below we’ll cover everything you need to know when it comes to the profitability of a saas company.

Let’s dive in!

Is a saas company profitable?

Yes, a saas company is generally a profitable business. However, you still need to consider several factors since these things always impact the overall outcome.

For instance, since average revenue is $3.94M per year with an estimated gross margin of 90%, you could expect to recover your investment within 7 months or even less.

But of course, it all comes down to how much you earn compared to the potential revenues of your saas company.

To determine whether your business is profitable, you should earn more than your expenses in the beginning months. However, while you're in your first month, it can be challenging to know what to expect.

Therefore, you should maintain a record of your monthly expenses and income to determine whether you're meeting your goals. By doing this step, you can see how your saas company is doing and if any changes or adjustments need to be made to enhance or maintain your efforts.

Is a saas company worth it?

If you’re wondering if a saas company is worth it, the answer is a big YES. With saas companies, you have the potential to earn $3.94M per year (this is based on data reported by real founders).

Further, you could have your initial investment back within months. Simply put, it’s a business worth a shot, especially if you have the resources and make the necessary efforts to achieve or surpass the target.

With a market size of $581B, it will be possible for you to build something that grows and turns into a flourishing business. As such, it’s the type of business you might want to consider starting.

Of course, you must learn and understand every aspect of running a saas company to ensure success. Still, as long as you have the initial investment and can endure a few months before your actual gains, this business could be worth it.

You might want to consider reading more specifics about successful saas companies case studies.

Examples Of Profitable Saas Companies

Here are a few examples of profitable saas companies, and a few more details about them:

1. Distro ($1.68M/year)

Chad Ingram, the founder and CEO of Distro, came up with the idea for his business after facing challenges with hiring and retaining software developers in his previous ventures. Seeing the need for a better alternative in the competitive labor market, Chad created Distro as a marketplace for companies to find, hire, and pay remote development teams. Within 8 months of launching, Distro has already surpassed $2 million in annual recurring revenue and is focused on scaling its marketing and product implementation.

Is it profitable? Yes
How much money it makes: $1.68M/year
How much did it cost to start: $250K

Distro: From MVP To $2M ARR In 8 Months

Distro, a marketplace for companies to find and hire software developers, has reached $2 million in ARR in just 8 months, and is profitable, giving founders hope to grow through capital efficiency focussing on product and sales by aggressively targeting a $3.5 million ARR by December 2022 alongside building a scalable marketing system and product implementation.

Read this case study

Read by 3,223 founders

2. Swift App ($120K/year)

Jeet Mehta, one of the founders of Swift App, came up with the idea for the business after hearing the complaints of a sports facility owner. He and his team, all working full-time in Toronto tech, decided to build a prototype that would help facility owners manage bookings and save time. After receiving positive feedback and securing their first paying customer, they launched the business and have since grown to $10K/month in revenue.

Is it profitable? Yes
How much money it makes: $120K/year
How much did it cost to start: $300

How 3 Friends Turned A Fun Side Project Into A $120K/Year SaaS For Sports Facility Owners

Swift App founders built software to help sports facility owners run their businesses, freeing up valuable time with an easy-to-use online booking system, which has helped the company grow to $10k/month in revenue.

Read this case study

Read by 5,258 founders

3. Paragon ($3M/year)

Brandon and his co-founder Ishmael came up with the idea for Paragon through their extensive experience as software developers.

During their previous ventures, including building Polymail, they repeatedly encountered the challenge of creating and maintaining integrations for various software applications, which was time-consuming and complex.

This recurring pain point highlighted a significant inefficiency in the software development process. Recognizing that every software company faces similar integration issues, they envisioned a solution to simplify and standardize this process.

Their goal was to democratize software development by creating a productized solution for SaaS integrations, ultimately leading to the creation of Paragon.

Is it profitable? Yes
How much money it makes: $3M/year

How Brandon Foo Built Paragon To $3M ARR

Discover how Brandon Foo co-founded Paragon, a platform simplifying integration processes for software applications, with impressive revenue figures of $250K/month and $3M/year, targeting B2B marketing through LinkedIn for consistent acquisition.

Read this case study

Read by 361 founders

Learn more about starting a saas company:

Where to start?

-> Saas company plan
-> How to finance a saas company?
-> How much does it cost to start a saas company?
-> Pros and cons of a saas company

Need inspiration?

-> Other saas company success stories
-> Marketing ideas for a saas company

Other resources

-> Saas company tips

How much can you make with a saas company?

With a saas company, you can make an average of $3.94M revenue per year (based on data reported by real businesses).

You can start with an initial investment as low as $1. Then, with proper knowledge and sustained effort, you could have an ROI (return of investment) within 7 months.

How much does a saas company make a week?

Based on our data, average weekly revenue for a saas company ranges around $82K. As such, you could see monthly revenues of $328K.

To know if your saas company achieves the weekly profit target, you need to keep track of the total earnings you get per day. Afterward, you'll want to consider subtracting the expenses you have daily.

Learning your weekly profit can also show whether you're hitting your target goal for your saas company.

How much do saas companies owners make?

The income of a saas company owner can vary depending on various factors such as location, size, competition, and the owner's business skills.

But to give you some idea, the weekly revenue of an established saas company is about $82K. But this can be lower or higher depending on so many factors - it's almost impossible to say exactly.

While the potential for earning a good income as a saas company owner exists, success in this field requires a commitment to providing quality products and services and building a strong reputation within the community.

Saas Company Profit Margins

Generally speaking, a saas company can expect profit margin of around 90%. Profit margins refer to the percentage of revenue that remains after deducting all expenses associated with running a business. In the case of a saas company, profit margins can vary depending on various factors, such as the type and quality of products sold, the size of the store, and the level of competition in the area.

However, these figures can vary depending on the pricing strategy, inventory management, and overall efficiency of the business. To maintain healthy profit margins, saas company owners must focus on managing costs, negotiating favorable supplier terms, and providing high-quality products and services to attract and retain customers. By doing so, saas company owners can ensure long-term sustainability and profitability for their business.

Saas company owner salary

The salary of a saas company owner is an unpredictable figure. It's significantly influenced by numerous factors, including the store's location, its size, and the degree of competition. An owner of a well-established saas company, in a prime position, might see an average weekly salary around the ballpark of $73.8K.

But it's worth noting, such numbers aren't always consistent. The earnings can vary wildly, potentially swinging by as much as 80% either way.

Achieving consistent success and maintaining a reliable income stream in this industry requires a deep commitment. It's imperative to offer high-quality products, deliver impeccable customer service, and nurture a trusted bond with the community you serve.

Conclusion

In a nutshell, based on many of our examples, a saas company may be a promising business to start - but the success of your saas company mostly depends on your effort and your approach.

If you focus on these, you'll have a much higher chance of a profitable saas company.

Part of

Starting A Saas Company: Everything You Need To Know

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