Low- versus High Net Revenue Retention
Most SaaS companies want to grow from expansions and upsell now.
But 95% of them are ill-equipped in doing so.
Here are the 6 things you must do to unlock massive growth from your existing customer base:
1. Acquire high-quality customers
I may repeat myself but you can’t overemphasize the importance of having the right customers on board.
If you acquire bad-fit customers and you’ll lose twice in the process
They will eventually churn and replacing lost revenue makes it way harder to achieve high net revenue retention
You will waste a lot of resources trying to save them meaning that you can’t spend enough time on your high-growth customers
But there are not only both extremes - great-fit and bad-fit customers but a lot in between.
Customers with a mediocre fit may get enough value to keep them renewing but they might never grow.
Speaking of, when you are determining your ideal customers, looking for growth potential should be a part of it.
How likely do they
have more potential users/teams to adopt the product?
need more resources?
need more features?
2. Run airtight discoveries
If you don’t understand your customers’ needs you will fail.
There’s no room for guessing and assuming even though it’s the standard operating procedure in most SaaS companies.
It’s not enough to identify the goal on the surface because you need to bridge the gap between their status quo and their goal.
Your customers’ needs are determined by
the problems they need to solve and
the reasons why the problem exists
their current skills and knowledge
their processes and business model
possible industry-specific rules that affect the outcome
3. Build a dedicated solution
I haven’t met a single company that does not think they have a great product.
But in reality, most of them have a more or less random mix of industry-typical features and functions.
They keep adding more stuff based either in a vacuum or based on popular demand.
Instead of qualifying feature requests by whom sent them in and evaluating whether there’s a projected value impact.
A great product is the embodiment of a specific methodology with a certain idea of how customers are supposed to use it.
There are zero features that can be eliminated without creating harm to your customers’ outcomes.
The most important goal when it comes to building your product is to add more value for your best customers and not try to appease each and everybody.
4. Turn CSMs into management consultants
Customer success managers are no longer mere product educators.
Because the technology is not your customers’ bottleneck.
After a (little) while, they’ll understand how to best use your features and functions.
But here’s the thing: The greatest product in the world can’t produce great outcomes from poor inputs.
Your mission is to educate, train and consult your customers to help them build expertise on the job they need the product for.
You need to ensure that they understand how to create high-quality inputs.
The further your customers climb on the “value ladder” the more highly specific and personalized consulting services they will need.
You need to be able to succeed in leading customers to the promised land accurately and repeatedly.
CSMs who want to play on the big stage need to build subject expertise on their own.
5. Solve big and bigger problems
Many SaaS companies are selling “all-in-one” solutions.
They cover everything that’s conceivably possible in the respective field but they (almost) never excel in solving one thing exceptionally well.
But customers don’t care about saving 2 working hours per month, increasing conversion rates by 0.1%, or getting 10 more likes on their social media posts.
If you are selling a commodity, nice-to-have customers have no reason to buy more from you.
Customers develop demand for expansions and upsells to further grow their value.
Yes, you need to deliver proof of value first.
Help your customers’ to solve their most valuable problems and if you’re done help them solve the next big one.
6. Tracking customer outcomes at all times
How much value do you have to deliver and how is it measured?
The solution is surprisingly simple which is why many SaaS companies don’t have it on their radar: Ask your customers.
Ask them what they intend to achieve and how they measure success respectively the ROI of using your product and working with you.
Yes, there’s a high probability that it’s not scalable but that does not matter.
Because it’s not your priority - helping customers to succeed is.
It does not matter whether they are looking to
and achieve their personal-related goals.
You need to understand what they want and create mutual accountability for the intended outcome.
A high NRR separates the elite from the pack because there are no hacks, tricks, or shortcuts to get there.
Every SaaS company can grow 50% YoY with enough cash to burn.
But growing 50% from your existing customer is a different story.
Does your company excel in growing NRR?