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Companies typically track three churn metrics: customer churn, gross-revenue churn, and net-revenue churn. The most comprehensive of these three metrics is net-revenue churn, as it captures both the dollar value lost from churning customers and the dollar value gained from expansion revenue (which comes from both up-selling and cross-selling to existing customers). Our analysis showed several results:

  • Across all three customer types, companies in the top quartile of growth maintained lower net-revenue churn than mean performers.
  • The net-revenue performance of the top-quartile-growth performers was driven most significantly by advantages in gross-revenue churn as opposed to logo churn or revenue expansion (upsell/cross sell) within existing accounts.
  • Companies that excel at lowering gross-revenue churn emphasize several key customer-success best practices throughout their organizations.
Mckinsey

More SaaS + Software Stats

SAAS companies with >$250K median ACV book nearly 25% of their contracts at 3 years or longer

To generate a single dollar of new customer revenue, Field Sales strategies have an average Customer Acquisition Cost (CAC) of $1.14

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

Improve Your Pricing Schedule And Turn More Profit

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

How to Reduce Churn

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business

The median annual unit churn for SAAS companies was 10% in 2016

The top 50% of the fastest growing SaaS businesses generate much higher upsells than their competitors. The larger the business, the greater the impact of upselling

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

More Growth Strategy Stats

SaaS IPOs have more than doubled over the last 12 years

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

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

A 2017 SaaS Capital survey showed that young companies actually have higher retention rates than more mature SaaS businesses

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

The average company booking professional services revenue on new deals is equivalent to 16% of the first year subscription value. Professional services margins are approximately 22%

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business

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

Software and online services are in a period of dizzying growth

86% of SaaS businesses treat “New Customer Acquisition” as their highest growth priority, both in terms of executive support and funding available