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

SaaS, and other recurring revenue businesses are different because the revenue for the service comes over an extended period of time (the customer lifetime)

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

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

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

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

Increases in revenue growth rates drive twice as much market-capitalisation gain as margin improvements for companies with less than $4 billion in revenues

The top 50% of the fastest growing SaaS businesses generate much higher upsells than their competitors. The larger the business, the greater the impact of upselling

Median annual gross dollar churn was 8%, 7%, 6% and 8% in 2016, 2015, 2014 and 2013

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

Getting paid in advance is really smart idea if you can do it without impacting bookings, as it can provide the cash flow that you need to cover your cash problem

More Growth Strategy Stats

More than 1/2 of SAAS companies increased their spending on customer retention last year

Companies that spend more on sales and marketing (as a % of revenue) generally grew at a faster rate than those that spent less

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

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

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

Even if a software company is growing at 60% annually, its chances of becoming a multibillion-dollar giant are no better than 50/50

Software and online services are in a period of dizzying growth

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%

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

The fastest growing SAAS companies averaged $250k in MRR and were only losing around 3.2% of that revenue each month to churn