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

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By definition, non-renewal rates are higher than gross dollar churn rates. However, it is interesting to see that the non-renewal rates are also higher for shorter duration contracts.

As contract sizes increase, gross dollar churn consistently trends downwards (presumably related to longer contract terms). This year’s results were largely consistent with last year’s. However, churn trended up markedly for the smaller size contract groups (<$5K median ACV).

More SaaS + Software Stats

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

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

Revenue Churn Rate = (RCR) (MRR at beginning of month – MRR at end of month) – MRR in upgrades during month / MRR at beginning of month

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

In 2017, IBM generated 37.8 billion U.S. dollars in global IT services revenue, making it the largest IT services company in the world in terms of net sales

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

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

Analysed by contract value, field sales are primarily evident for companies with median deals over $25K. Inside sales strategies are most popular for companies with $1K-$25K median deal sizes

Is your SaaS business viable?

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

More Growth Strategy Stats

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 Make Pricing A Constant Process In Your Organization

The fastest growing SaaS companies scale their organizations rapidly, growing their teams by an average of 56% each year

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

Achieving a SaaS Quick Ratio of 4 is a good benchmark for young, high-growth companies but the equation changes as those companies reach scale

SAAS companies that are focused mainly on enterprise sales have higher levels of professional services

Internet sales-driven companies have a much greater reliance on marketing, with 65% of the median company’s CAC budget devoted to marketing

SaaS businesses face significant losses in the early years (and often an associated cash flow problem)

Customer Acquisition Cost (CAC) = sum of all sales & marketing expenses/ number of new customers added

If you are charging $500 per month, you can afford to spend up to 12x that amount (i.e. $6,000) on acquiring a new customer