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We reduce the time and complexity of each step from prospect to customer to evangelist for increased lifetime value.
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Reported median annual unit churn (by customer count) is 10% for the group. This median has remained relatively consistent with 2015 findings.
Not surprisingly, companies with longer contracts (2+ years) reported the lowest annual unit churn.
Median annual gross dollar churn (without the benefit of upsells) is ~8%. This result is comparable to past survey results (7% in 2015, 6% in 2014, 8% in 2013).
The very best SaaS businesses have a negative revenue churn rate and will have a Revenue Retention Rate of greater than 100%
Account Churn Rate (ACR) = customers at beginning of month – customers at the end of month / customers at beginning of month
For a SaaS business of almost any scale, the valuation impact of better retention is in the tens of millions over time
As with unit churn, companies with longer contracts (2+ years) tend to report lower annual dollar churn
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%
How To Make Pricing A Constant Process In Your Organization
SaaS, and other recurring revenue businesses are different because the revenue for the service comes over an extended period of time (the customer lifetime)
Internet sales strategies are the only sales method to see a decline in CAC, dropping from $0.54 to $0.42 between 2014 and 2015
How to Reduce Churn
Since churn is so important, wouldn’t it be useful if we could predict in advance which customers were most likely to churn?
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
73% of organizations indicated nearly all their apps will be SaaS by 2021
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.
The venture-backed companies that were acquired most often had a 7 percent share of female execs, as opposed to 3 percent at unsuccessful (unacquired) firms
In 2017, the world invested around 3.4 billion U.S. dollars in small hydropower technologies, down from 3.9 billion U.S. dollars in 2016.
If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business
51% of large (revenue >$2.5million) SaaS companies use field sales as their primary method of distribution
The largest SaaS companies (>$75million yearly revenue) attribute 2.5x as much new revenue to upselling than the smallest SaaS companies (<$1.25million): 28% versus 11%
Best-in-class SaaS companies achieve 5-7% annual revenue churn – equivalent to a loss of $1 out of every $200 each month
The global cloud computing market size is expected to grow from USD 371.4 billion in 2020 to USD 832.1 billion by 2025