How to retain revenue: 9 key moves

Ever wonder why some startups have great customer retention and how they do it? SaaS needs revenue retention like humans need water. Business models like SaaS that rely on recurring revenue can’t survive, let alone grow, for too long without a healthy retention rate.

But ‘retention’ involves more than simply keeping customers around for longer. To grow market share, generate income, and ultimately make an impact, startups also need existing customers to buy more.

How?

💡 Did you know that 50% of Hubspot’s growth today comes from their install base? I.e., keeping existing customers around longer, upsells, and expansion. Hubspot succeeded in improving revenue retention from 85% to 110% from 2018 to 2021!

After a quick review of two critical retention metrics, we'll cover the main event: developing a playbook to drive those metrics.

Keep an eye on two retention metrics as you develop your retention playbook

Execs and investors measure retention with metrics called NRR (Net Revenue Retention) and GRR (Gross Revenue Retention).

When I was at 15Five, we had strong NRR, but we kept a close eye on GRR. NRR can hide upticks in cancelations or contractions, especially if expansions and upsells are strong. Watch out for the silent killer lurking in NRR.

According to Bessemer Venture Partners, startups approaching $10M see NRR between 105% and 145%. From my own experience, startups need to shoot for NRR closer to the middle of that range.

These deceptively simple retention metrics affect everything that matters in SaaS financial—including ARR growth, CAC-LTV ratios, capital efficiency, and, most important, enterprise value. More on this in a future post.

Choose from 9 key moves to build your retention playbook

So, how do you drive up expansions and upsells while keeping cancellations and contractions down? Use the 9-point checklist below to identify the best bets for your startup:

1. Build a slick product that people want to use

Customers are often surprised by gaps in the product after they buy. So, startups often address the problem by making CSMs fill the gaps. But that never works. Build a product that elegantly solves a meaningful problem; otherwise, the items below can’t help.

2. Attract the right customers

If you’ve got the right product, but you’re converting the wrong customers or setting the wrong expectations, churn will become a problem. This is more common than you’d think as product strategies change and if product, sales, and marketing teams aren’t operating as one.

3. Your customers’ needs have changed–figure them out

As prospects become customers, their priorities change. They care about different things when they were in buying mode vs. facing the realities of implementation, roll-out, and regular usage. Investing in understanding customers post-purchase will pay off in spades, especially if choose to keep moving down this list.

💡 Don't forget to segment your customers after researching their needs. Segmenting can help in at least 2 ways:

4. Help customers get value from the product–quickly

Onboarding and implementation set the stage for the rest of your customer’s life with your product. Weak onboarding, whether it’s automated or CS-assisted, is often very hard to recover from. Identify key stakeholders, uncover high priorities, and quickly deliver value–all actions that will either make or break your customer relationship from day 1.

5. Keep them coming back for more

Just because your client signed a 6-figure annual contract doesn’t mean they’ll necessarily find opportunities to regularly use your product. Inspire them with regular touchpoints that show how other customers, your own team, and industry experts suggest using your product to create value. This is where classic customer marketing comes in.

6. Know how to upsell/expand customers

Much like acquiring and converting leads, you need a similar plan to upsell customers. But don’t bother if you haven’t performed on the items above first. No use trying to upsell customers who don’t necessarily trust you (yet). But if you give yourself strong grades on items 1-5 above, talk to your customer marketer or growth manager about creating a pipeline.

7. Reward loyalty

Find financial and non-financial ways to reward the customers who stick with you. Even a simple loyalty program gives you one more touchpoint to remind customers of your product and the value it offers. Use loyalty programs to reward high-value actions like testimonials, case studies, and other forms of customer advocacy. Make it a win-win for everyone.

8. Share your roadmap and involve your customers

Most startups underestimate the value of talking about their roadmap with customers in groups or 1-on-1. Big mistake. I understand the anxiety and risk involved, but it's worth it. I’ve seen customers renew after a difficult year with the product because of the roadmap. Even if your product has a high NPS, customers still want to know if your product will evolve as their business needs change from year to year. Remember, competitors are constantly knocking on your customers' doors.

9. Measure your customers’ progress toward realizing value

Last but not least, don’t forget to find efficient ways to track customer journeys after purchasing your product. How long did implementation take? Is the time to value getting shorter or longer? Are your customers realizing value? Why or why not? Where are the gaps? Answer those questions and take action.