What is Renewals Retention Rate?
Renewal retention rate measures the percentage of customers or subscriptions that are successfully renewed at the end of a specific period. It indicates the company’s ability to retain existing customers and maintain their business over time.
Another option is to consider renewal retention rate by value.
How is Renewals Retention Rate calculated?
Renewals Retention Rate is calculated by dividing the number of customers or subscriptions that renewed during a given period by the total number of customers or subscriptions up for renewal. Multiply this by 100 to express it as a percentage.
Here’s the formula:
For example, let’s say a SaaS company had 500 customers up for renewal in a month, and out of those, 450 renewed their subscriptions. The renewal retention rate would be:
Renewal Retention Rate = (450 / 500) * 100 = 90%
This means that the company successfully renewed 90% of its existing customers during that period.
How is Renewals Retention Rate used by SaaS companies?
Renewal retention rate directly impacts recurring revenue and long-term sustainability. A high renewal retention rate indicates customer satisfaction, product value, and effective customer retention strategies. Conversely, a low renewal retention rate may indicate customer dissatisfaction, competitive pressures, or areas of improvement needed in the product or customer experience.
What is a good Renewals Retention Rate?
A good renewal retention rate varies widely depending on target market, pricing model, and the nature of the product or service being offered. In general, the higher the better, and a common target for SaaS companies is a retention rate of above 90% or higher.
The best indication of performance is frequently an internal comparison to prior quarter or year, as usually the goal for a SaaS company is to continuously improve its renewals retention rate over time.
What are the Renewals Retention benchmarks?
There are no specific benchmarks for renewals retention, as it will vary significantly depending on the industry, market, and other factors. It is important for a company to track its renewals retention rate over time and compare it to its own past performance.
Typically, Net Dollar Retention is used to measure total customer retention across SaaS companies. See here for a full definition and details.
Renewals Retention Rate visualisation example
ScaleXP is the leading SaaS finance tool, able to provide a full suite of SaaS metrics, automatically calculated each month. The system connects to and imports data from both your accounting (Xero or NetSuite) and CRM (HubSpot or Salesforce) systems. As data is imported, a series of smart algorithms prepare a revenue recognition schedule and from this, graphs such as these which show both ARR and a budget or latest forecast.
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