So there’s a perhaps obvious conversation everyone should be having, but isn’t:
“Look, in 2023 we basically hid inside our existing customer base. We pushed through record price increases. We made it harder to cancel. We tried everything we could in upsell. And most importantly, we relied on our 100%+ NRR to stay in the game.”
While I don’t love it, I get it in a tough year. 100%+ NRR helps you stay in the game even in tougher times.
The most extreme example of the public Cloud and SaaS companies is Fastly. It literally added no new customers last year and basically none the past 2 years. But with 114-118%+ NRR, it was still able to grow 18%!
But we saw it everywhere. We saw Cloud and SaaS leaders sending unsolicited 3 year binding contracts to month-to-month customers. We saw threats to lose your data if you left. And we saw even folks like Slack that had never done a true price increase do one for the first time.
Another related issue with hiding behind the base is it disguises low sales and marketing performance and high CACs. David Spitz of Benchsights put together a great chart here showing how CACs have reached likely all-time highs in SaaS. You can sort of hide a high CAC if you combine slower growth, a hiring freeze, and high NRR. High NRR can cover your base costs, like Fastly. But it can also mask a high CAC.
Hiding Behind The Base? That playbook works once, or at least once every 5-8 years or so. Customers aren’t stupid. They’re frustrated with these games, and they remember. Now it’s time to get back to New Logo Growth.
Track that metric religiously in 2024. Incent it. Be flexible. Add a new 10x feature. Change the game. And maybe take renewals away from sales — if they took it too far in 2023. We saw way too much abuse here in 2023.
Whatever you do, don’t Hide in NRR in 2024. It’s time to get back to new logo growth.