How Do We Track Retention When We Offer Multi-year Contracts | SaaS Metrics School | Retention

About this Video

• Video Title: How Do We Track Retention When We Offer Multi-year Contracts | SaaS Metrics School | Retention
• Channel: The SaaS CFO
• Speakers: Ben Meray
• Duration: 00:04:05

Introduction

This SaaS Metrics School video addresses how to track customer retention when offering multi-year contracts. The video focuses on calculating churn and retention rates accurately, especially for SaaS companies with higher ACV (Annual Contract Value) products targeting mid-market and enterprise clients. The core issue is that monthly retention figures can be artificially inflated due to the multi-year nature of contracts, not all customers being up for renewal simultaneously.

Key Takeaways

• Monthly retention numbers can be misleading with multi-year contracts: Since not all customers renew monthly, standard monthly retention calculations might be artificially high.
• Renewal rate is a crucial complementary metric: This metric focuses on customers whose contracts are up for renewal, offering a clearer picture of churn. It's calculated on a dollar and account basis, typically pulled from a CRM system.
• Renewal rate is a leading indicator of future aggregate revenue retention: Trends in renewal rates provide early warnings of potential problems impacting future aggregate revenue retention.
• Aggregate revenue retention and renewal rates are tracked on a dollar and account basis: This provides a comprehensive view of customer retention.
• The month for tracking renewal rates is the anniversary date of the contract: This ensures consistency and accuracy.