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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

73% of organizations indicated nearly all their apps will be SaaS by 2021

Software and online services are in a period of dizzying growth

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

How to Reduce Churn

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

If the numerator of your quick ratio is growing that means your revenue is growing. It’s important to keep increasing revenue to counter any MRR (Monthly Recurring Revenue) that is lost to churn

Revenue per employee has been steadily increasing in SAAS companies. It serves as a great longitudinal measuring stick to understand the increasing or decreasing efficiency of the business

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

Three uses for the SaaS Guidelines

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

More Growth Strategy Stats

Negative Churn and Expansion Revenue

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

The median SaaS business loses about 10% of its revenue to churn each year and that works out to about 0.83% revenue churn a month

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

54% treat upselling and add-on sales as high priority

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

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

In 2017, the world invested around 3.4 billion U.S. dollars in small hydropower technologies, down from 3.9 billion U.S. dollars in 2016.

Three uses for the SaaS Guidelines

56% treat “Existing Customer Renewals” as high priority