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Yes, you might have “negative churn” or “expansion revenue” where you lose some customers but the ones that stay pay you more over the course of the year.

That’s awesome! Expansion revenue is the best.

Unfortunately, in my experience, SaaS providers with high churn rates often don’t know how to effectively up-sell, cross-sell, or even down-sell so their churn rate is rarely offset by expansion revenue.

And the cost of acquiring more customers – especially when accurately figuring in all sales, marketing, on-boarding, and support costs – will frequently do more to offset what expansion revenue they have than the other way around.

As well, their pricing models are usually such that they don’t effectively move customers to higher pricing tiers and, in fact, often have non-value differentiators (like storage) separating pricing tiers so that customers game the system to avoid paying more (a major churn threat, by the way).

That said, assuming you’ve got up-sells and cross-sells that work and you have a pricing model that encourages customers to use more so they pay more to drive expansion revenue, how much better would it be if you could expand revenue over a larger customer-base by keeping more customers?

Right… so even when arguing for expansion revenue, I’m also arguing for lower churn.


sixteenventures.com

More SaaS + Software Stats

To generate a single dollar of new customer revenue, Field Sales strategies have an average Customer Acquisition Cost (CAC) of $1.14

The metrics that matter for each sales funnel, vary from one company to the next depending on the steps involved in the funnel

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

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

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

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

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

The median TTM revenue growth rate + adj. EBITDA margin for publicly traded SaaS companies was ~37%, implying that just under one half met or exceed “The Rule of 40%”

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

To establish a revenue or lead-commitment based on your funnel metrics and revenue-growth goals, work backward from the gross revenue amount that marketing is responsible for generating (generally around 40%)