Statistic Info

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business. At 2% monthly churn, you are losing about 22% of your revenue every year. That is nearly a quarter of your revenue! It’s a clear indication that there is something wrong with the business. As the business gets bigger, this will become a major drag on growth.

We recommend that you work on fixing the problems that are causing this before you go on to worry about other parts of your business. Some of the possible causes of churn are:

  • You are not meeting your customers expectations.
    • The product may not provide enough value
    • Instability or bugginess
  • Your product is not sticky. It might provide some value in the first few months, and then once the customer has that value, they may feel they don’t need to keep paying. To make your product sticky, try making it a key part of their monthly workflow, and/or have them store data in your product that is highly valuable to them, where the value would be lost of they cancelled.
  • You have not successfully got the customer’s users to adopt the product. Or they may not be using certain of the key sticky features in the product.
  • Your sales force may have oversold the product, or sold it to a customer that is not well suited to get the benefits
  • You may be selling to SMB’s where a lot of them go out of business. It isn’t enough that what you’re selling is sticky. Who you’re selling it to must also be sticky.
  • You are not using a pricing scheme that helps drive expansion bookings

The best way to find out why customers are churning is to get on the phone with them and ask them. If churn is a significant part of your business, we recommend that the founders themselves make these calls. They need to hear first hand what the problem is, as this is so important for the success of the business. And they are likely to be the best people to design a fix for the problem.


For Entrepreneurs.com

More Growth Strategy Stats

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%

The best SaaS companies achieve 5-7% annual revenue churn – equivalent to a loss of $1 out of every $200 each month

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

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business; which may have a dramatically negative effect on your company’s growth. Source: Mckinsey

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

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

At a 35% CAGR, it takes 10 years for a SaaS company to grow from $5M to $100M in ARR

How to Reduce Churn

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”

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