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

Statistic Info

An acceptable churn rate is in the 5 – 7% range ANNUALLY, depending upon whether you measure customers or revenue.

And BVP’s assertion is backed up by Pacific Crest in their Private SaaS Company Survey Results that show roughly 70% of SaaS companies in their survey had annual churn in the < 10% range, with 75% of those at 5% or under.

The way I read the results of Pacific Crest’s survey is that 30% of SaaS providers surveyed have an unacceptable level of churn.

Now what about the SaaS providers that aren’t included in surveys like that one or who don’t appear in the logo list of the top investor portfolios and who are just trying to grow? Are they doing better or worse?

More SaaS + Software Stats

Growth rate accelerates in the expansion stage ($2.5M – $10M ARR)

56% treat “Existing Customer Renewals” as high priority

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

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

Publicly-traded SaaS companies have an average Revenue Per Employee of $200,000

SaaS IPOs have more than doubled over the last 12 years

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

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

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

The best SAAS businesses have a LTV to CAC ratio that is higher than 3, sometimes as high as 7 or 8

More Growth Strategy Stats

High-growth companies offer a return to shareholders 5 times greater than medium-growth companies

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

The median startup spends 92% of first year revenue on customer acquisition, taking 11-months to payback their Customer Acquisition Cost

Negative Churn and Expansion Revenue

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

86% of SaaS businesses treat “New Customer Acquisition” as their highest growth priority, both in terms of executive support and funding available

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%

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)

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