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

Statistic Info

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.

More SaaS + Software Stats

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

Account Churn Rate (ACR) = customers at beginning of month – customers at the end of month / customers at beginning of month

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

How to Reduce Churn

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

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

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

When determining Sales Capacity, “it’s worth noting that some percentage of new sales hires won’t meet expectations, so that should be taken into consideration when setting hiring goals. Typically we have seen failure rates around 25-30% for field sales reps, but this varies by company. The failure rate is lower for inside sales reps. can be counted as half of a productive rep”

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

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

More Growth Strategy Stats

Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable.

Growing faster has twice as much impact on share price as improving margins

High-growth companies are 8X more likely to reach $1 billion in revenues than those growing less than 20%.

How to Reduce Churn

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

26% of SAAS companies with at least $15MM in GAAP revenue had a revenue growth rate + EBITDA margin of 40% or higher.

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

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts. Source: ForEntrepreneurs

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

47% of millennials want to work at diverse companies, according to a recent study.