SaaS Capital: No Churn – Keep customers and improve your SaaS company valuation (2015 update)

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InsightaaS: SaaS Capital has just released a new whitepaper, one which dovetails neatly with the focus of the TCBC group focused on financing cloud businesses. It provides a clear perspective, backed by both research and experience, on the connection between customer churn and valuation.

The impact of churn on revenue and growth – the twin drivers of shareholder value – is described in stark terms. Charts based on current valuations show the real-world impact of growth and revenue on shareholder value in companies like Salesforce, Workday and ServiceNow. An example contrasting the metrics around two fictitious companies, “Retention Inc.” and “ChurnCo Solutions,” illustrates the difference between 95% customer retention and 80% customer retention: after five years, and using multiples vetted by independent experts like 451 Research, Retention Inc. is worth nearly three times as much as ChurnCo. The whitepaper closes with research from SaaS Capital that illustrates the direct link between focus on churn – especially, focus tied to compensation and bonuses – and reductions in churn rates.

On the whole, this is a very good whitepaper – clearly written, easy to digest, and imparts a clear and important message. Worth the time to review!

 

Here’s a link to download a copy (one-time free registration required): http://insightaas.com/ChurnCo-7-15 

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