Tom Tunguz

FEBRUARY 26, 2025

Third, contracts mitigate churn rates because the customer is only making a renewal decision once per year, instead of 12x per year. Similarly, Salesforce began with a usage-based approach before shifting to annual seat contracts when churn rates became significant and revenue predictability faltered.

SaaS Payments 283

SaaS Payments Pricing Strategy Scale 283

SaaStr

NOVEMBER 21, 2020

At least 100% net negative churn (i.e., upsell/account growth + renewals – churn) for very small businesses. Let’s look at some of the top public SaaS companies: Shopify — very SMB: 100%. Hubspot — mostly SMB: 100%. Surverymonkey — fairly SMB, but going more enterprise: 100%. And mostly SMBs.

Retention 350

Retention SMB SaaS Enterprise 350

SaaStr

JUNE 2, 2022

Two things though did get hit harder — SMB Churn and Upsell s. Customers kept buying more SaaS than ever, which masked all-time high churn in SMB accounts. SMBs just plain went out of business in ’08-’09. So our gross SMB churn spiked to a crazy high of 5.5%

SMB 361

SMB SaaS Churn Enterprise 361

SaaStr

APRIL 1, 2023

How To Capture This Global SMBTech Opportunity There is massive market opportunity to sell to SMB businesses. What It Takes To Win With small businesses, you will have more churn and business volatility than with an enterprise. Efficient Go To Market There are a lot of ways to GTM as an SMB. SMBTech is primed for growth.

Scale 245

Scale SMB Merchant Services Payment Methods 245

SaaStr

MAY 1, 2024

SMB Churn coming down, but still at SMB-Like Levels Zoom for years defied what we knew about SMB churn. It had 110%+ NRR from SMBs! But in the end, today, at scale, their small customers churn is at the same high rates as other “grab and go” SMB products. What a crazy story.

SMB 305

SMB Scale Banking Enterprise 305

SaaStr

AUGUST 29, 2022

SMB SaaS has a lot going for it: – Millions of them – Short sales cycles – Easier compete. But, it's often hard to get to $100m ARR selling just to SMBs. sell just to SMBs pic.twitter.com/Po1I2aMaBK. So many VCs and others have gotten more and more excited about SMB SaaS. Millions and millions more.

SaaS Payments 347

SaaS Payments Scale SMB PayPal 347

SaaStr

JANUARY 2, 2021

We can see that NRR for tiny customers is probably about 100%, as it is for other SMB leaders. Again, the latest crop of Cloud IPOs shows SMBs seem to have no limit in terms of TAM, with SMB growth at Shopify and Zendesk keeping up with enterprise, and even at Asana, SMB growth is still impressive at $250m ARR.

SMB 363

SMB Enterprise Cloud Churn 363

SaaStr

JUNE 7, 2021

If your SMB product requires or has a salesperson involved in closing, that’s a clear sign you also want a human being involved in making sure that customer is a success post-sale, too. Just assign a certain amount of ARR per each SMB customer success manager. Support has to handle a lot of routine SMB issues anyways.

Customer Success 353

Customer Success Scale SMB Sales 353

SaaStr

DECEMBER 20, 2021

They’re changes you might want to make as well if you focused on SMBs and mid-market especially: #1. Moving from Churn to NRR as the Core Retention Metric. This may sound obvious to more enterprise folks, but many Very Small Business and SMB focused SaaS companies still focus more on churn than NRR.

Metrics 62

Metrics SMB Scale B2C 62

SaaStr

JUNE 8, 2022

ARR, Zoom was an SMB powerhouse, with Enterprise growing. SMB is now saturated at $4B ARR and not growing, but Enterprise is picking up the slack and growing faster than ever. Enterprise NRR is now 123%, but than means SMB is now well under 100%. ARR … which it did in just 1 year (!!)

SMB 340

SMB Enterprise Engineering Scale 340

SaaStr

MAY 19, 2019

What lessons can we learn from this huge Kiwi SMB success, for other founders? ” So even in SMB sales in smaller markets, if you take dominant market share — you can get to $500m+ in ARR! ” So even in SMB sales in smaller markets, if you take dominant market share — you can get to $500m+ in ARR!

SMB 270

SMB Customer Lifetime Value AWS Churn 270

SaaStr

JULY 22, 2021

We’ve seen this with sales-drive SMB and SME leaders like Xero as well. If you are selling to SMBs, you have to be very efficient. Gross annual churn of 4%, NRR of 107%. It’s great to see an SME leader disclose the combo of gross churn and NRR. #7. 180,000 revenue per employee.

Scale 334

Scale SMB compliance Churn 334

SaaStr

APRIL 26, 2023

Most of the website / presence growth came from price increases, which saw limited churn as a result. Churn was modest from their price increase, leading to material growth. Relatively inexpensive products selling to SMBs that are truly valuable don’t see much increased churn from moderate price increases. #3.

Scale 298

Scale SMB Churn Pricing 298

SaaStr

JANUARY 12, 2021

Churn is 1.1% Most of the companies in this 5 Interesting Learnings Series have had net negative churn from SMBs (e.g., Xero’s SMB churn isn’t zero. Customer Lifetime Value is 81 months, from SMBs. Inclusive of upsells and churn, their ARPU is $29.25 And the U.K. Zoom, PagerDuty, etc.).

Customer Lifetime Value 289

Customer Lifetime Value SMB Churn Scale 289

SaaStr

OCTOBER 29, 2020

Zendesk’s churn is still a bit higher than pre-Covid, but is almost back to pre-Covid levels. So if you sell to SMBs, or a mix of SMBs and enterprise like Zendesk does (with 160,000 total customers), well … enough with the excuses on churn. Sometimes, you just stay a steady mix of Enterprise and SMB.

SMB 298

SMB Enterprise Churn Retention 298

SaaStr

JULY 31, 2022

The Challenge with SMB SaaS: High Growth Can Only Mask High Churn For Just So Long. SMB SaaS has a lot going for it, but one big existential challenge — inherent churn. 7 Secrets to a Successful SMB GTM Strategy with PayFit and Accel. A deep dive on selling to SMBs and more from SaaStr Europa.

New CTO 306

New CTO CTO SMB Venture Capital 306

SaaStr

FEBRUARY 17, 2021

While Wix’s actual churn is a bit unclear, this is a super interesting presentation of CLTV. Efficient at SMB marketing — an ~8 month CAC. We saw in this series other SMB leaders like GoDaddy and Xero need to get well into Year 2 to go profitable on a new customer, but Wix gets there in just 7-9 months.

Payment Methods 313

Payment Methods Payment Solutions Payments SMB 313

SaaStr

SEPTEMBER 26, 2019

What we learned from ’08-’09 in SaaS: First, SMB churn went through the roof — as SMBs went under much more quickly and often. As soon as the economy went south, SMBs started to simply go bankrupt and/or shut down. Anyone processing a lot of SMB and credit-card deals saw churn probably double.

SaaS Payments 280

SaaS Payments Sales Hiring Scale SMB 280

SaaStr

OCTOBER 22, 2021

GRR of 86% and NRR of 119% are very impressive for SMBs … although they only count customers with 5+ seats. Their tiniest customers still have higher churn, as with almost every other SaaS company. A reminder to segment churn, and be careful when looking at public company NRR rates. Expansion so far is limited to U.K,

Scale 329

Scale SaaS Payments SMB Payment Solutions 329

SaaStr

MAY 20, 2024

Not Jumping on High Churn Some types of churn certainly can be addressed over time. It can take years for some SMB SaaS companies to hit and cross 100% NRR, for example. But if your churn and retention numbers aren’t at least mid-pack for your category, don’t let it lurk.

Trends 318

Trends Scale Sales Hiring Venture Capital 318

SaaStr

OCTOBER 21, 2023

Dear SaaStr: What is the average percentage of annual vs. monthly plan sold for a BtoB SaaS startup targeting the SMB market? 90% of Smartsheet’s SMB customers pay annually. The more onboarding there is, the higher the churn you’ll see in monthly deals. 20%+- will pay annually to save money.

Data 288

Data SMB Payment Features Churn 288

SaaStr

MARCH 20, 2021

Smartsheet: 123%+ NRR from all customers, so probably ~110% from SMBs : #2. Zendesk: 112% NRR overall, with 40% SMB. So probably again around 100% NRR from SMBs.: #3. monthly churn. So still north of 100% for its SMBs. A few thoughts: Yes, SMBs churn at a higher rate than enterprises, both gross and net.

SMB 288

SMB Churn Retention Enterprise 288

SaaStr

DECEMBER 3, 2023

SMB SaaS often has much lower than 100% NRR, especially to start. In fact, Very Small Businesses often see 3% a month churn or higher. Eventually most SaaS SMB leaders get to 100% NRR one way, or another (often by either going multiproduct and/or a bit more upmarket). But you can’t count that as profitable revenue. They don’t.

SaaS Payments 285

SaaS Payments Metrics SMB Payments 285

SaaStr

APRIL 17, 2021

It’s very helpful to see this called out for SMBs, and is pretty low for a public SaaS company. But perhaps not that uncommon for higher-churn SMB categories. Most higher-churn SaaS companies seem to obscure, or at least, not highlight any NRR below 100%. 70% annual, 30% monthly subscriptions.

Payment Methods 339

Payment Methods Merchant Services Payments Payment Services 339

SaaStr

AUGUST 6, 2022

The Challenge with SMB SaaS: High Growth Can Only Mask High Churn For Just So Long. SaaStr 576: 7 Secrets to a Successful SMB Go-To-Market Strategy with PayFit Co-Founder and CEO Firmin Zocchetto and Accel Partner Philippe Botteri. Is Every SaaS Startup Worth Half of What It Was Last Year? Top Podcasts This Week: 1.

SMB 278

SMB Startup Scaling Churn 278

SaaStr

AUGUST 28, 2024

And with that, it seemed a good time to dig in with one of the great SMB leaders Bill. With a super impressive 111% NRR from SMBs. 5 quarters is fairly efficient for an enterprise model, but it’s not always enough for SMBs if the churn is high and NRR low. Grab the final tickets here!! 5 Interesting Learnings: #1.

Payments 298

Payments Payment Solutions SMB Acquisition 298

SaaStr

JULY 14, 2020

It may be the most successful SMB-focused app of our current generation. Yes, nominal churn may seem lower by removing a monthly option. If they churn at the end of a yearly subscription, or 6 months into a monthly one, they’re still gone. Let’s take a look at Zoom. You just make buying your app harder. But that’s an illusion.

Pricing 306

Pricing Scale Payment Solutions SaaS Payments 306

Tom Tunguz

APRIL 8, 2015

There’s a familiar path now to SaaS companies that start in the SMB (small-to-medium business) part of the market. In short, new startups leverage a distribution advantage to acquire SMB customers at scale. Smaller customers churn at higher rates. Segment Monthly Customer Churn % Annual Customer Churn %.

Innovation 208

Innovation Startup Scale SMB 208

SaaStr

APRIL 7, 2021

“SaaStr 415: Fighting Churn with Data featuring, Carl Gold, Chief Data Scientist at Zuora “ A great session from SaaStr on perhaps the #1 more important topic at scale … fighting churn. #3. And how to win in a very competitive market. #7.

Scale 244

Scale SMB Churn Scaling 244

SaaStr

OCTOBER 26, 2023

In a year like this, SMB is doing worse, with a lot more churn and startups going out of business. But in other years, SMBs are jumping in the boat, so you get amazing growth long-term with a multi-segment strategy. Sometimes, it might look like SMB churn when they’re really just moving into mid-market.

Sales Hiring 287

Sales Hiring AI SMB Scale 287

SaaStr

DECEMBER 27, 2020

Those of us who’ve been around a while think of New Relic as a freemium and almost SMB tool, but today 77% of their revenue comes from accounts greater than $100k. New Relic’s net negative churn / net dollar retention has dropped to 98% in the last quarter, despite a record 77% of revenue being from the enterprise.

Scale 342

Scale Outsourced Development SMB Cloud 342

SaaStr

APRIL 8, 2020

Click here for ChartMogul’s free-forever launch plan that will give SaaS businesses access to the world’s first subscription data platform so they can analyze and improve key metrics like MRR, churn and LTV. Hiver’s Free Shared Inboxes for SMB. What are they all about? What are they all about?

Machine Learning 308

Machine Learning Artificial Intelligence SaaS Consulting 308

SaaStr

APRIL 24, 2022

BowtiedCocoon: Top SaaS SMB AEs have $125k OTEs. 10 Rules for Defining Churn with SVP of Customer Success & Retention at Solarwinds, Andrea Webb, and SVP of Commercial Strategy & Operations at ForgeRock, Tim Willey. Each week, we round up our most popular content so you can catch up on anything you may have missed.

Sales Hiring 300

Sales Hiring Revenue Scale SMB 300

SaaStr

JUNE 29, 2022

It’s moved beyond its tiniest customers, of an ACV of < $1k, but other than that, it’s going upmarket without giving up its SMB roots. Even though Zendesk still has thousands and thousands of SMB customers. #2. Zendesk IPO’d as an SMB support solution. At $1B in ARR, Zendesk was growing 24%.

SMB 300

SMB Scale B2B Revenue 300

SaaStr

SEPTEMBER 7, 2023

A few things that always work to drive down churn in the early days — and later: Make sure you have a strong Head of Customer Success … whose #1 goal is reducing churn. That may seem to help short-term revenue, but it will lead to a de-focusing on driving down churn. Far fewer customers churn if you visit them in person.

Sales Hiring 299

Sales Hiring SaaS SMB Churn 299

SaaStr

JUNE 22, 2023

SMB folks want to go upmarket because there is too much churn in SMB. . – SaaStr Trying to pursue a “Grass is Greener” business model. Enterprise folks want to do freemium because they think it is easier. B2B folks want to do B2C. That’s OK, but pretty risky. 85 times out of 100 — do what you know.

SMB 279

SMB SaaS B2C Interviewing 279

SaaStr

DECEMBER 29, 2019

Some take-aways: If You Truly Have Net Negative Churn and High NPS — Then Almost Any Reasonable CAC Makes Sense. But you have to have insane NPS/CSAT + truly high net negative churn (120%-140%) for this math to really work. Enterprise deals are nothing like SMB deals, most especially over the long term. Measure NPS.

Scale 353

Scale Churn Construction SMB 353