Dissecting Pacific Crest’s 2016 SaaS Survey
Customer Success nerds everywhere rejoice- the annual Pacific Crest SaaS Survey results are in (Part I and Part II), and there’s plenty of great insights to be gained from this treasure trove of insightful SaaS metrics. Let’s jump into a few of the take aways for Customer Success teams.
Upsells and expansions take your business to the next level
This is hardly a new concept, but it’s useful to see the data behind just how impactful not just retention, but upsells and expansions can be on a company’s balance sheet. Some stats that stand out:
Data Point: Respondents spent a median $1.13 to acquire $1 of ACV (annualized contract value) from a new customer. The median CAC ratio per $1 for upsells is $0.27, for expansions $0.20, and for renewals $0.13
- Take Away: The average SaaS company spends $.93 less to expand $1 of ACV with an existing customer than to bring in an additional dollar of revenue with a new customer.
Data Point: The median respondent brings in 15% of new ACV sales from upsells and expansions, with companies making $10MM-$40MM in revenue attributing an average of 23% of new revenue to upsells and expansions
- Take Away: As companies scale they become more likely to have structured their team in such a way that allows relationship managers to bring in additional revenue from existing customers.
Data Point: The median annual net dollar retention rate, including churn and the benefit of upsells, is 102%
- Take Away: The increased focus on customer success and retention across most of the SaaS sector has yielded positive results. 67% of companies surveyed expect the net revenue from their current customer base to remain stable or expand.
Know which customers churn and why
Once again, while this isn’t a new idea, it does bear repeating. If your churn rates are at just 5%, your company should be taking a long, hard look in the mirror and asking themselves which customers are churning and why. However, not all churn is created equal, and the take aways below can help guide your way down this path of self reflection.
Data Point: The delta between median per unit churn and gross dollar churn is 2%
- Take Away: There are few reasons you might expect to see per unit churn higher than gross churn. Smaller companies are more likely to have budgetary constraints and to scrutinize the ROI for every product they purchase- can your product prove its value under such intense scrutiny? Second, your Customer Success and Support teams are more likely to underinvest their time and effort in smaller customers. Both of these explanations assume that the majority of your per unit churn is among smaller companies that don’t pay much. Another possibility is that mid-market or enterprise level companies are trying your product, but are unwilling to go through the necessary change management to drive long-term success.
Data Point: Contracts shorter than a year have 50% higher gross dollar churn rates than month to month contracts and 77% higher per unit churn rates than month to month contracts
- Take Away: While you expect to see lower churn rates when you move away from month to month payments and onto longer term contracts, the huge spike in churn for contracts greater than a month but less than a year is a bit of headscratcher. My best guess is that this reflects some kind of transactional-type seasonality for these businesses. For instance, a LinkedIn premium subscription you only needed while you were looking to fill a role, or a MailChimp subscription used only during the holidays.
What was your take on this year’s survey and the SaaS metrics it dove into? Did anything surprise you or serve to reinforce assumptions you had made about your SaaS business?