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

Statistic Info

Executive Summary Summary of the top findings 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 staffing 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 influenced by customer retention and upsell For the third year in a row, the survey indicates that the fastest growing SaaS companies have a significantly 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

High-growth companies generate 60% fewer sales opportunities than low-growth companies

Even if a software company is growing at 60% annually, its chances of becoming a multibillion-dollar giant are no better than 50/50

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

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%

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

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

It’s 9x cheaper to retain existing customers than acquire new customers: costing $0.13 to acquire any additional dollar of revenue

Smaller SAAS companies reported more frequent use of third-party providers as their primary application delivery method, while the largest companies were more likely to use self-managed servers

Companies that spend more on sales and marketing (as a % of revenue) generally grew at a faster rate than those that spent less

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

More Growth Strategy Stats

The average Quick Ratio of fastest growing SaaS companies (those with a CAGR of over 50%) is 3.9: generating $3.9 in revenue for every $1 lost to revenue churn

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%

How to Reduce Churn

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

The median cost for a SaaS company to acquire a dollar of new customer revenue is $1.18

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

The median monthly revenue churn for large SaaS companies is 0.75%, translating into an annual revenue churn rate of 10%

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

In 2018, the market size of information technology outsourcing amounted to 62 billion U.S. dollars.

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