Dear SaaStr: What Were Aspects of Your Startup That Were Easier Than Anticipated?
The part I didn’t originally get as a first-time SaaS founder was how relatively easy it is to grow exising accounts and account size if your customers are happy.
120% NRR: Your revenue doubles in 5 years even with no new customers
110% NRR: Your revenue doubles in 8 years even with no new customers
100% NRR: Your revenue stays the same with no new customers
— Jason ✨Be Kind✨ Lemkin (@jasonlk) April 20, 2021
We segmented customer retention by Small, Medium, and Large accounts after about 24 months and saw a pattern that we now know is very common: ~85% revenue retention from our Very Small Businesses, about 105% from Mid-Market; and about 120% from Larger Customers.
And the key is — that 120% revenue growth annually from Larger Customers as a cohort (and even the 105% from Mid-Market) compounds. 3, 4, 5 years out to something really large. In 3–5 years, you can double the revenue from your existing customer base, or at least a segment of it.
And that annual 120% revenue retention is much, much easier to get than a new customer. Not easy. This is why I early became a huge convert for doing Customer Success right. You do have to deliver. But so much easier than starting from scratch with a new prospect — if they are happy.
The challenge here is growing your accounts takes time. It’s tough to see much happen in a quarter or two. Because of that, the organization tends to get focused on the hot, incoming prospects instead. But over several years, it’s your most powerful lever for growth.