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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).

Mckinsey

More SaaS + Software Stats

Internet Sales strategies have a significantly lower CAC of just $0.42

It’s 4x cheaper to upsell existing customers than acquire new customers: costing just $0.28 to acquire an additional dollar of revenue

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

For a SaaS business of almost any scale, the valuation impact of better retention is in the tens of millions over time

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

80% of venture capital investments take place in the enterprise

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%)

Since churn is so important, wouldn’t it be useful if we could predict in advance which customers were most likely to churn?

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

The median TTM revenue growth rate + adj. EBITDA margin for publicly traded SaaS companies was ~37%, implying that just under one half met or exceed “The Rule of 40%”

More Growth Strategy Stats

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

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

When venture capitalists participate in seed rounds, the average round size is 3x larger

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts

In 2017, the global adoption rate for biotech soybean amounted to 77 percent.

For a SaaS business of almost any scale, the valuation impact of better retention is in the tens of millions over time

SAAS companies need to track the number of visitors, trials and closed deals; And also track the conversion rates, with the goal of improving those over time

Since churn is so important, wouldn’t it be useful if we could predict in advance which customers were most likely to churn?

If a software company grows at 20% annually, it has a 92% chance of ceasing to exist within a few years

In 2017, Foxconn Technology Group achieved revenue of 158.15 billion U.S. dollars.