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Upsells key to growth and scale

As shown in the chart below, companies that have made it past the $40MM revenue mark use upsells to drive a much higher percentage of their new Average Contract Value (ACV) than smaller companies. In fact, companies in the $40-75MM revenue range attribute twice as much new revenue to upsells as the median company.

Of course, it’s dangerous to imply causation here. There are a number of reasons why we might see this effect in later-stage companies. One unexciting possibility is that their overall growth in new business is slowing down and it’s skewing these percentages in favor of upsells. Let’s look at this data through another lens and explore how upsells are related to growth.

RJMetrics

More SaaS + Software Stats

The median annual contract value (ACV) was $25K, $21K, $21K, $20K in 2016, 2015, 2014 and 2013

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 than two thirds of SAAS companies experienced annual churn rates of 5% or higher

SaaS businesses face significant losses in the early years (and often an associated cash flow problem)

54% treat upselling and add-on sales as high priority

Gross dollar churn among companies with an internet go-to-market strategy saw a meaningful increase, up from 8% in 2015

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

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

56% treat “Existing Customer Renewals” as high priority

The very best SAAS business has a negative churn rate and will have a Dollar Retention Rate of greater than 100%

More Growth Strategy Stats

Sony’s PlayStation brand had accumulated approximately 38.57 million fans on the social network

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

36% of SaaS businesses managed to reduce their revenue churn over the last 12-months

Three uses for the SaaS Guidelines

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

Moving from $1.5 million with an eye towards $10 million in ARR is a tough a task and will take an excellent VP of sales to get you there

Is your SaaS business viable?

After $10M in ARR, the median growth rate slows to just under 50%

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

The median cost for a SaaS company to acquire a dollar of new customer revenue is $1.18