SaaS Trivia 2 — Questions and Answers
Question 1: Which company is widely credited with coining the term 'Software as a Service' (SaaS)?
- Salesforce (Correct answer)
- Microsoft
- Oracle
- SAP
Correct answer: Salesforce
Salesforce, founded in 1999, is broadly credited with popularizing and defining the SaaS model as it is known today.
Question 2: What does the 'Rule of 40' measure in SaaS company health?
- Revenue growth rate plus profit margin should exceed 40% (Correct answer)
- Annual recurring revenue must surpass $40M
- Customer acquisition cost must be under 40% of LTV
- Churn must stay below 40 basis points monthly
Correct answer: Revenue growth rate plus profit margin should exceed 40%
The Rule of 40 states that a SaaS company's revenue growth rate plus its profit margin should equal or exceed 40%.
Question 3: Which SaaS pricing model charges customers based on how much they actually use the product?
- Usage-based pricing (Correct answer)
- Freemium
- Flat-rate pricing
- Per-seat pricing
Correct answer: Usage-based pricing
Usage-based pricing (also called consumption-based pricing) ties the customer's bill directly to their consumption of the service.
Question 4: What is 'negative churn' in a SaaS context?
- Expansion revenue from existing customers outpaces revenue lost to cancellations (Correct answer)
- Zero customers canceling in a given month
- New customers acquired exceed customers lost
- Refunds issued are less than new subscriptions
Correct answer: Expansion revenue from existing customers outpaces revenue lost to cancellations
Negative churn occurs when upsell and expansion revenue from existing customers more than offsets any lost revenue from cancellations.
Question 5: Which SaaS metric specifically measures the revenue retained from existing customers, excluding new sales?
- Net Revenue Retention (NRR) (Correct answer)
- Customer Acquisition Cost (CAC)
- Monthly Recurring Revenue (MRR)
- Lead Velocity Rate (LVR)
Correct answer: Net Revenue Retention (NRR)
Net Revenue Retention (NRR) tracks how much recurring revenue is retained from the existing customer base after accounting for upgrades, downgrades, and churn.
Question 6: What is a 'freemium' model in SaaS?
- A free tier with limited features that upgrades to a paid plan (Correct answer)
- A free trial that automatically converts to paid
- A discount for paying annually upfront
- A referral program that earns free months
Correct answer: A free tier with limited features that upgrades to a paid plan
Freemium offers a permanently free product tier with basic features, hoping users will upgrade to paid plans for advanced capabilities.
Question 7: What term describes the percentage of customers who cancel their subscription in a given period?
- Churn rate (Correct answer)
- Burn rate
- Attrition multiple
- Contraction MRR
Correct answer: Churn rate
Churn rate is the percentage of customers (or revenue) that is lost within a specific time period, typically monthly or annually.
SaaS Trivia 2
Which company is widely credited with coining the term 'Software as a Service' (SaaS)?