What are user retention benchmarks for enterprise applications?

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JASON LEMKIN

As a rough rule, use 80% (very small customers), 95% (SMBs) and 120% (true enterprise) as your 1.0 benchmarks for net revenue retention. I.e., total revenue retained after 12 months per customer segment, inclusive of upsells.

It’s very situationally dependent, of course. But absent more data, start here:

  • For single-seat sales, and very small businesses — you are going to lose a lot of them. They are fickle, they go out of business, their credit cards get cancelled. 3% monthly churn is common here. So if you can retain 80% of that total cohort Very Small Business / Single Seat revenue after 12 months — that’s pretty darn good.
  • For SMBs, small businesses running on your platform — they still churn a lot. And upsell opportunities are fewer. But upsell is there as the companies grow, and usually, there is at least someone to manage your application. Hubspot has 95%+ net revenue retention here, including upsell. This is about as good as you are going to do with SMBs.
  • For true enterprise sales, almost everyone with high NPS has “net negative churn”. I.e., you may lose 10% of your logos per year, your customer count in The Big Guys … but you expand the accounts so much (because the companies are so big), you do at least 110% total revenue growth from those accounts. 120% is best-of-class, absent other dynamics. Box does this. So make this your initial bar.

Start here. And make sure you segment your customers by these 3 different segments. Measure where you are are today, in each segment, and use the above as 1.0 goals.

But what’s most important is driving churn down, and total revenue from existing customers up. So relative improvement, quarter-over-quarter, really is more important than absolute goals.

But these are good 1.0 absolute goals to start with.

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Published on August 16, 2016
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