Gross dollar churn is important, but in our view net dollar dollar retention is the critical figure to watch. It is generally defined as revenue from customers in the beginning of a period — revenue churned — revenue downgraded + upgrades all divided by revenue from customers in the beginning of a period (BEG — DOWN — CHURN + UPGRADE / BEG). The period is generally annual. We know of 49 publicly traded SaaS businesses that reported net retention when they went public and on median, their net retention is 111%, meaning upgrades by existing customers outweigh lost revenue/downgrades.
Do a fantastic job of onboarding new clients. The first 90 days is critical for any new client so make sure someone on your team is dedicated to a successful onboarding and ramp up of a new client. Your onboarding person should follow up every 90 days and offer to onboard any new employees or retrain old ones for free.
Contact the client often. At a minimum, someone at your organization should contact each champion at the client at least once a quarter. Make it a call, not an automated email. The original AE that sold the deal should check in periodically as well and use it as an opportunity not only to make sure everything is going smoothly, but also to add more seats, upsell features, etc.
Multi-year contracts. Incentivize your sales team to sign customers to multi-year contracts. No enterprise should be allowed to sign on month to month or even quarterly renewal.
sammy@blossomstreetventures.com
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