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

SaaS + Software
Statistic in Growth Strategy

Statistic Info

Inside Sales Driven Companies Grow Fastest Inside sales driven distribution companies grow about 40% faster than companies using field sales, web sales or channel, or about 37% revenue growth per year.

Price the Product Between $1k to $25k Annually to Optimize Growth Companies with contract sizes of $1k to $25k grow the fastest, about 26% faster or 35% y/y. I suspect there are two reasons to support this pattern. First, purchases under $25k tend to require fewer approvals which decreases sales cycle. Second, these accounts can be closed by inside sales reps which are far less expensive than field sales. On the same sales investment, a startup may be able to hire three or four inside sales reps for each field sales rep.

Cost of Customer Acquisition is About 11 Months’ of Revenue The median startup spends about 92% of first year average contract value on the sale, implying an 11 month payback period on the CAC. An additional months’ revenue is required to upsell a customer and about the same is required to close a renewal.

Tomasz Tonguz

More SaaS + Software Stats

The median annual unit churn for SAAS companies was 10% in 2016

High-growth companies generate 60% fewer sales opportunities than low-growth companies

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

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

While field sales remains the most popular way to sell for companies >$2.5MM revenue, companies with <$2.5MM revenue tended to use inside sales as their primary mode of distribution

Customer’s lifetime value (LTV)= average revenue per user (ARPU) / monthly churn rate

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

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

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

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

More Growth Strategy Stats

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

They may forget what you said, but they will never forget how you made them feel.

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

How to Reduce Churn

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

The fastest growing SaaS companies raise an average of $9.5M in Series A funding

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

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

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

Analyzed 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

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