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

Our experiences with SaaS startups indicate that they usually start with a couple of lead generation programs such as Pay Per Click Google Ad-words, radio ads, etc

The statistic shows the worldwide IT spending on enterprise software from 2009 to 2020.

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

Only 8% of large companies use internet sales strategies. The proportion of companies relying on internet sales increases as company size decreases

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

In all SaaS businesses there will likely come a moment where they realize that not all customers are created equal

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

51% of large (revenue >$2.5million) SaaS companies use field sales as their primary method of distribution

As companies scale their growth engines, a slightly-above-average churn rate becomes harder and harder to offset with net new revenue growth, especially when the goal is to outpace it by 4x

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%

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%

Revenue Renewal Rate= (MRR up for the renewal at beginning of month- MRR not renewed at the end of month)/ MRR up for renewal at beginning of month)

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

The 2015 median revenue growth rate was 44%, while the median projected growth rate for 2016 is 48%

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

After $10M in ARR, the median growth rate slows to just under 50%

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

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.

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

SaaS companies in the $7.5MM-$15MM range are among the fastest growers