Quote Info

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

If you are charging $500 per month, you can afford to spend up to 12x that amount (i.e. $6,000) on acquiring a new customer

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%”

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

Is your SaaS business viable?

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

Our experiences with SaaS startups indicate that they usually start with a couple of lead generation programs such as Pay Per Click Google Ad-words, radio ads, etc

51% of large (revenue >$2.5million) SaaS companies use field sales as their primary method of distribution

Gross dollar churn among companies with an internet go-to-market strategy saw a meaningful increase, up from 8% in 2015

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

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

More Growth Strategy Stats

As with unit churn, companies with longer contracts (2+ years) tend to report lower annual dollar churn

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

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

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

SaaS IPOs have more than doubled over the last 12 years

When determining Sales Capacity, “it’s worth noting that some percentage of new sales hires won’t meet expectations, so that should be taken into consideration when setting hiring goals. Typically we have seen failure rates around 25-30% for field sales reps, but this varies by company. The failure rate is lower for inside sales reps. can be counted as half of a productive rep”

Invention is 10% inspiration and 90% perspiration.

It’s 9x cheaper to retain existing customers than acquire new customers: costing $0.13 to acquire any additional dollar of revenue

If the numerator of your quick ratio is growing that means your revenue is growing. It’s important to keep increasing revenue to counter any MRR (Monthly Recurring Revenue) that is lost to churn

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%”