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

From Saas Capital
Statistic in SaaS & Tech Growth Strategy
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.

More SaaS + Software Stats

The very best SAAS companies keep monthly revenue churn at around 0.58%, that’s only about 7% revenue churn a year

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

In contrast to these, the median annual churn rate for smaller, private SaaS companies with less than $10M in revenue is 20%

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

High-growth companies are 8X more likely to reach $1 billion in revenues than those growing less than 20%.

73% of organizations indicated nearly all their apps will be SaaS by 2021

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%

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

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

All types of investment have grown, year-on-year, with the biggest growth during the seed stage of financing

More SaaS & Tech Growth Strategy Stats

Internet sales-driven companies have a much greater reliance on marketing, with 65% of the median company’s CAC budget devoted to marketing

The median annual contract value (ACV) was $25K, $21K, $21K, $20K in 2016, 2015, 2014 and 2013

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

SaaS IPOs have more than doubled over the last 12 years

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

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

SAAS companies that are focused mainly on enterprise sales have higher levels of professional services

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

The global cloud computing market size is expected to grow from USD 371.4 billion in 2020 to USD 832.1 billion by 2025

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