56% treat “Existing Customer Renewals” as high priority

Quote Info

Companies that are doing a good job of controlling churn and driving new revenue from existing customers are on the whole growing substantially faster than their peers. Companies still place priority on new customer acquisition Despite a shift in the metrics companies are tracking, priority and funding for customer renewals and upsell has not increased. This suggests that despite best intentions to focus on monetizing existing customers, day-to-day business realities make it difficult for companies to shift priority and funding. SaaS metrics shifting focus toward existing customers This year more companies than ever are looking at metrics on existing customers such as customer lifetime value, revenue per user, product adoption, and customer health.

More SaaS + Software Stats

As companies scale their growth engines, a slightly-above-average churn rate becomes harder and harder to offset with net new revenue growth, especially when the goal is to outpace it by 4x

After $10M in ARR, the median growth rate slows to just under 50%

The median SaaS business loses about 10% of its revenue to churn each year and that works out to about 0.83% revenue churn a month

The median TTM revenue growth rate + adj. EBITDA margin for publicly traded SaaS companies was ~37%, implying that just under one half met or exceed “The Rule of 40%”

SaaS businesses face significant losses in the early years (and often an associated cash flow problem)

Growth rate accelerates in the expansion stage ($2.5M – $10M ARR)

The best SaaS companies achieve 5-7% annual revenue churn – equivalent to a loss of $1 out of every $200 each month

More than two thirds of SAAS companies experienced annual churn rates of 5% or higher

SaaS companies in the $7.5MM-$15MM range are among the fastest growers

Even if a software company is growing at 60% annually, its chances of becoming a multibillion-dollar giant are no better than 50/50

More Growth Strategy Stats

The best SAAS businesses have a LTV to CAC ratio that is higher than 3, sometimes as high as 7 or 8

The metrics that matter for each sales funnel, vary from one company to the next depending on the steps involved in the funnel

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts

For a SaaS business of almost any scale, the valuation impact of better retention is in the tens of millions over time

Three uses for the SaaS Guidelines

Getting paid in advance is really smart idea if you can do it without impacting bookings, as it can provide the cash flow that you need to cover your cash problem

Net-revenue churn improves with larger Average Contract Value (ACV), likely due to more structural churn among SMB customers and higher switching costs associated with larger contracts

Analyzed by contract value, field sales are primarily evident for companies with median deals over $25K. Inside sales strategies are most popular for companies with $1K-$25K median deal sizes

A 1% increase in pricing strategy yields an average 11% increase in profit

Growth rate accelerates in the expansion stage ($2.5M – $10M ARR)