The Acceptable Level of SaaS Retention/Churn

Churn or retention is a key metric every SaaS business has to watch, but what is an acceptable level of churn? To answer this question, we reviewed the annual filings of the 40 publicly traded SaaS companies and summarized the data in the link below.

https://www.dropbox.com/s/1hay6f6spozjs49/Churn%20Rates%20of%20Publics.xlsx?dl=0

 

Our key findings and general observations are as follows:

 

-Of the 40 public companies we monitored, only 16 reported any kind of retention or churn statistic.  It’s not a GAAP figure so no public company is required to report this data. 

 

-The most common retention statistic reported was an annual calculation of net revenue retention.  In other words, the companies took revenue in the current year for all customers and divided by revenue last year for those same customers.  As such, the retention statistic is skewed by upsells, additions to contracts, and price increases.  We’re actually fine with this reporting because although it clouds the number of customers or revenue lost, all we really care about is whether or not your customers are spending more money or less money than they used to

 

-Of the 16 companies, reporting, the net retention was a median of 100% and average of 106%.  Remember these are mature, public companies with a very developed product, so if you’re a young startup or Series A/B company with net retention figures above this, in my view you’re doing well.  

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