More than two thirds of SAAS companies experienced annual churn rates of 5% or higher

Statistic Info

Executive Summary Summary of the top ?ndings from the latest SaaS Metrics Survey. Customer retention cost, customer health, and customer lifetime value are the new frontier in SaaS metrics The SaaS industry continues to be a challenged by high churn rates Spending on customer retention is growing SaaS companies continue to invest in tracking more metrics on their existing customers. The top new metrics companies plan to track in 2016 are customer retention cost, customer health, and customer lifetime value. More than two-thirds of the surveyed SaaS companies experienced annual churn rates of 5% or higher. Additionally, almost the same number saw an increase or no change in churn since the previous year. More than half of the companies surveyed increased their spending on customer retention last year. Spending on sta?ng increased at a faster clip compared to spending on technology or programs, suggesting that companies are still more focused on building out their teams vs. putting in place the infrastructure to scale customer retention operations. Upsell and expansion sales are a missed opportunity for SaaS vendors For the large majority of SaaS companies surveyed (81%), only 20% or less of new revenue came from existing customers in the form of upsell and expansion sales. SaaS company growth rates are strongly in?uenced by customer retention and upsell For the third year in a row, the survey indicates that the fastest growing SaaS companies have a signi?cantly better record on churn and upsell, underscoring the critical role of managing revenue from existing customers in the SaaS business model.

More SaaS + Software Stats

Negative Churn and Expansion Revenue

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

Unlike many other industries, if a software company grows at only 20%, it has a 92% chance of ceasing to exist within a few years

The median startup spends 92% of first year revenue on customer acquisition, taking 11-months to payback their Customer Acquisition Cost

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

The fastest growing SaaS companies raise an average of $9.5M in Series A funding

SaaS businesses face significant losses in the early years (and often an associated cash flow problem)

The average company gets 16% of new ACV sales from up-sells and expansions, though companies with revenue between $10MM-$40MM are relying more heavily on up-sell and expansions

To establish a revenue or lead-commitment based on your funnel metrics and revenue-growth goals, work backward from the gross revenue amount that marketing is responsible for generating (generally around 40%)

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

More Growth Strategy Stats

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

Is your SaaS business viable?

As of December 2018, there were total 105,000 employees in Lockheed Martin, as compared to 126,000 employees in 2015.

The median startup spends 92% of first year revenue on customer acquisition, taking 11-months to payback their Customer Acquisition Cost

The top 50% of the fastest growing SaaS businesses generate much higher upsells than their competitors. The larger the business, the greater the impact of upselling

Revenue Churn Rate = (RCR) (MRR at beginning of month – MRR at end of month) – MRR in upgrades during month / MRR at beginning of month

Three uses for the SaaS Guidelines

Google only has a 30 percent female workforce

Companies with longer contracts (2+ years) reported the lowest annual unit churn

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