How to Reduce Churn

SaaS + Software
Quote in Growth Strategy

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Honestly, there’s nothing magical to reducing churn, it’s just ensuring that your customers continue to realize value from your service.

First, though, you have to get them to start using your service – either through a sale or in a free trial – but without over-promising and by otherwise managing expectations properly. I’ve actually seen a large amount of customer churn directly correlated to missteps during the sales and on-boarding phases, by the way, so keep that in mind.

Then, once the customer is up and running your only job is to ensure they keep realizing (more and more) value from your service.

While you may not add years to your customer lifetime or eliminate churn entirely, what could you do with an extra 6 months of revenue from your customers on average? What would that do to your company valuation?

sixteenventures.com

More SaaS + Software Stats

Publicly-traded SaaS companies have an average Revenue Per Employee of $200,000

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

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

It’s 4x cheaper to upsell existing customers than acquire new customers: costing just $0.28 to acquire an additional dollar of revenue

Increases in revenue growth rates drive twice as much market-capitalisation gain as margin improvements for companies with less than $4 billion in revenues

While field sales remains the most popular way to sell for companies >$2.5MM revenue, companies with <$2.5MM revenue tended to use inside sales as their primary mode of distribution

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

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

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts. Source: ForEntrepreneurs

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%

More Growth Strategy Stats

The average SaaS company spends just 6 hours determining their pricing strategy

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

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

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

Analysed 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

A 1% increase in pricing strategy yields an average 11% increase in profit

Moving from $1.5 million with an eye towards $10 million in ARR is a tough a task and will take an excellent VP of sales to get you there

36% of SaaS businesses managed to reduce their revenue churn over the last 12-months

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

It’s 4x cheaper to upsell existing customers than acquire new customers: costing just $0.28 to acquire an additional dollar of revenue

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