A little while back, I caught up with a great VP of Sales that had been using Adobe Sign / EchoSign for 11 (!) years. Her company had been acquired, and the acquirer canceled the contract, due to a feature gap in the new company’s business process stack. Lesson #1: it still hurts! Even when you haven’t worked there for the better part of a decade. It never feels good to lose a customer. 🙁
But Lesson #2 was that Customers for Life isn’t just a tagline. If that feature gap had been closed, they likely would have been a customer for another 11 years. “No one wanted to cancel”, she said. “We just waited a year for that feature to launch, and it never did.”
11 years x $80,000 a year = $880,000 CLTV from that first sale. Plus, she had recommended the company many times. Let’s call that at least a 2x multiplier in Second Order Revenue. That was almost a two million dollar TCLTV customer … lost after 11 years to a feature gap.
So what are the lessons learned in the 11 year, Million Dollar Customer? Nothing new, but a good summary of many SaaStr themes:
- Go meet your customers. As many as humanly possible. Yes, this customer churned after 11 years. But it was a reluctant churn. We’d met her many times in person. If we hadn’t? The reluctance wouldn’t have been there. Get on a jet, folks. Meet at least 5 customers a month — in person. Spend a little more time on existing customers, and a little less time on prospects and Hot Deals as CEO. More here.
- When you lose a customer, it may be 11 years until you get another chance. Be more rigorous about the losses. We celebrate the wins, but we don’t tend to spend as much time on the losses. That’s natural. This stuff is hard as it is. But perhaps it’s backward, at least once you are at scale. Spend more time on analyzing lost deals. Do it every month. And aggressively make sure that when you get another prospect like the one you lost, you don’t lose it the next time. And that when you lose a long-time customer, you don’t lose another one just like it. Of course, celebrate the wins. But the losses — both in prospects / deals and in existing customers — are also a painful but almost priceless case study in how to do better next time. Spend more honest, non-finger-pointing time analyzing Lost Deals and Lost Customers. At least once a quarter in a formal Lost Deals & Customers review.
- Champion change is your biggest risk with happy customers. Flag these customers and treat them as Almost Brand New Deals. While this particular deal was nominally due to a feature gap (a material one in this case), the reality is it happened after an acquisition. A new owner, a new boss. These are tough changes. You have to resell the deal all over again — literally. Get on a jet, go introduce yourself, and ask for their business. Again. Champion Change customers often highlight an organizational gap between the aggressive approach of the sales team and often a more passive approach of customer success. In that gap, customers with champion change churn.
- Worry less about competition, more about improving. This was an account a competitor aggressively courted. They offered their competitive product for free. Fancy dinners. All that. The customer noticed, but didn’t care. She cared about a feature gap, but not all the rest. Competition is stressful and can be very aggressive, but customers don’t want to leave. Not if you provide a ton of value.
- Go long if you have happy customers and Net Negative Churn — Go Very Long. I didn’t get this as a CEO. But if you have happy customers and net negative churn (i.e., your accounts grow each year in dollar terms, net of churn) — then you can go so very long. These customers really will last 11+ years, even longer. This isn’t the only way to build a Unicorn in SaaS, but it’s the most reliable way. If you get to $8-$10m ARR with 120% revenue retention and have a strong team … just do the maths. You can get to $100m ARR, as crazy as that may sound. So start investing longer.
- Heroics can work. At least, try for real. This 11 year customer could have been saved if the feature gap had been closed, notwithstanding the champion change issue. Once a customer truly churns, they may be gone forever, or at least another 11 years. But if they are complaining? That’s your opportunity to save the account. Lost accounts don’t complain. Because they’ve already switched.
- Growth is King, but Retention Builds Empires. You know this, but this was a $550,000+ customer that was lost. All the effort it takes to bring in a new $50k customer probably dwarfed what was invested on this existing customer for the past few years. Drive churn down every quarter. Drive NPS up constantly. Add that extra CSM.
Go long, my friends, in SaaS. It’s worth it.