Statistic Info

Consistently retaining customers is an important characteristic of any successful SaaS business, and an entire industry, Customer Success, has sprouted up to help SaaS executives do just that. However, knowing what is a “good” retention rate for your individual SaaS company remains difficult to pin down. This research helps answer that question based on our survey of over 700 private SaaS companies.

SaaS customer retention is broken down by:

  • average contract value
  • company size
  • company age

This brief also explores the relationship between growth and retention, the “false positive” retention rates of young SaaS businesses, and the impact of Customer Success programs on overall retention.

Saas Capital

More SaaS + Software Stats

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

The median average contract length is 1.3 years and the average billing term is seven months in advance in 2016. Comparable to 2015, with average contract length shortening from 1.5 to 1.3 years and average billing period increasing by one month from 2015 to 7 months

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

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

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

55% of SaaS companies rate Customer Retention as the key metric to measure

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

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

How to Reduce Churn

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

More Growth Strategy Stats

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

In 2017, IBM generated 37.8 billion U.S. dollars in global IT services revenue, making it the largest IT services company in the world in terms of net sales

In 2017, Foxconn Technology Group achieved a net income of 135.37 billion New Taiwanese dollars, the equivalent to approximately 4.55 billion U.S. dollars.

More than 1/2 of SAAS companies increased their spending on customer retention last year

80% of venture capital investments take place in the enterprise

Negative Churn and Expansion Revenue

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”

The median Customer Acquisition Cost (CAC) for upsells is just $0.28 per $1, less than a quarter of the $1.18 spent to acquire $1 of revenue from a new customer

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

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