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

Statistic Info

Monthly vs. Annual Churn Rates

Now, just so we’re on the same page, 5% – 7% Annual churn – the good churn rate – translates to 0.42 – 0.58% monthly churn.

This means companies with acceptable churn only lose about 1 out of every 200 customers (or dollars) per month.

Now that’s a solid platform you can really build a high-growth company on.

On the flip side, a high churn rate is the reason you ended 2012 with a whole bunch of new customers… but had about the same amount of revenue.

Churn is the reason that – though you acquired a lot of new logos in 2012 – you had no significant year over year growth from 2011.

More SaaS + Software Stats

Revenue per employee has been steadily increasing in SAAS companies. It serves as a great longitudinal measuring stick to understand the increasing or decreasing efficiency of the business

Revenue Churn Rate = (RCR) (MRR at beginning of month – MRR at end of month) – MRR in upgrades during month / MRR at beginning of month

The very best SaaS businesses have a negative revenue churn rate and will have a Revenue Retention Rate of greater than 100%

Only 8% of large companies use internet sales strategies. The proportion of companies relying on internet sales increases as company size decreases

Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable.

Japanese company Hitachi accounted for three percent of the world’s market for diagnostic imaging in 2017.

Internet Sales strategies have a significantly lower CAC of just $0.42

Since churn is so important, wouldn’t it be useful if we could predict in advance which customers were most likely to churn?

If a software company grows at 20% annually, it has a 92% chance of ceasing to exist within a few years

Account Churn Rate (ACR) = customers at beginning of month – customers at the end of month / customers at beginning of month

More Growth Strategy Stats

Internet Sales strategies have a significantly lower CAC of just $0.42

The median SaaS business generates 16% of its new Annual Contract Value (ACV) from upselling to existing customers

They may forget what you said, but they will never forget how you made them feel.

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

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

26% of SAAS companies with at least $15MM in 2015 GAAP revenue had a revenue growth rate + EBITDA margin of 40% or higher

The fastest growing SAAS companies averaged $250k in MRR and were only losing around 3.2% of that revenue each month to churn

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

To establish a revenue or lead-commitment based on your funnel metrics and revenue-growth goals, work backward from the gross revenue amount that marketing is responsible for generating (generally around 40%)

Three uses for the SaaS Guidelines