One of advantages of building tech #partnerships, like integrations, is that they can decrease churn up to 50% 🎯. What's more, doubling down on retention and account growth can beat the results of focusing on New Business too. Here is how.
Previously I wrote how Atlassian famously discovered that integrations make their product 2X stickier. “When customers add at least one app or integration in Jira Software, dollar churn reduces by approximately half”.
In Salesforce 85% of 💰 revenue is coming from 20% of customers that use 4+ clouds (products),
🛠️ Now, imagine a #startup that needs to grow their revenue (ARR) with these characteristics:
$1m of new business /year
10% account growth
75% renewal rate
Given they have funding, they could (1) double down on sales (New ARR) or (2) double down on renewal rate and account growth.
1️⃣ Double New Business from $1m to $2m 🚀, but keep renewals and account growth unchanged
I.e. focus on sales to new accounts
$1m => $2m of New Business /year
10% account growth
75% renewal rate
2️⃣ Improve renewals and account growth, keep New Business unchanged
I.e. focus on retaining and upselling to existing accounts via partnerships or customer success.
$1m of new business /year
10% => 30% Account Growth
75% => 95% Renewal Rate
📈The short-term results of second scenario, year 1-3 would be worse than their competitors, but in year 5 their ARR will be 30% ahead and the spread will only grow over time.
💡 At the times like today, when New Revenue is non trivial,
retention and account growth is more important than ever. It will pay big dividends in the long-term.
Image source: Pear VC