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

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The results of our analysis show that top-quartile-growth performers have much lower net-revenue churn than mean performers. The analysis also shows that 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 (Exhibit 1). In particular, between the SMB and the SMBs-and-enterprises customer types, top-quartile performers not only have net-revenue churn that is 14 to 23 percentage points less than mean performers but also have net-revenue churn that is negative in an absolute sense. Negative net-revenue churn means that these top-quartile performers would continue to grow even if they did not acquire any new customers (their ACV expansion in existing accounts is greater than any revenue churn from existing customers).

More SaaS + Software Stats

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

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business; this will become a major drag on growth

The median Customer Acquisition Cost (CAC) for upsells is just $0.28 per $1, less than a quarter of the $1.18 spent to acquire $1 of revenue from a new customer

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

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

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

SAAS companies invest between 80% and 120% of their revenue in sales and marketing in the first 5 years of their existence

The very best SaaS businesses have a negative revenue churn rate and will have a Revenue Retention Rate of greater than 100%

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

More Growth Strategy Stats

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%)

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

It’s common for startups to grow rapidly, doubling or tripling in size year over year, until they hit $5M in ARR

Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable.

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

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

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business

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

Median annual gross dollar churn was 8%, 7%, 6% and 8% in 2016, 2015, 2014 and 2013