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SaaS Renewals Rate Analysis Copyright 2005-2013 Dave Kellogg and licensed under a Creative Commons Attribution

-Noncommercial-Share Alike 3.0 Unite Revision 1.1 Original Contract Date Seats A Price A Price A, subtotal Annual increase cap Renewal Date Seats A Price A Seats B Price B

7/30/2012 100 $ 1,200 /seat/year 120,000 3%

(252,300)

Price A, subtotal Price B, subtotal Total price, 1 year Total price, 3 year Three year discount, % Three year discount, $ Bookings (TCV) ARR ARR from A ARR from B

Bookings (TCV) ARR

120,000 120,000

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6/30/2013 80 1,225 /seat/year 40 1,200 /seat/year

Renewals Rates Count-based, customers Count-based, seats, gross Count-based, seats, net ARR-based, gross ARR-based, net Bookings-based, gross Bookings-based, net Leaky Bucket Analysis Starting ARR New ARR Churn ARR Ending ARR

100% 120% 80% 103% 69% 310% 208%

98,000 48,000 146,000 438,000 15% 65,700 372,300 124,100 83,300 40,800

120,000 40,800 (36,700) 124,100

Notes: Gross = including expansion Net = excluding expansion Bookings = TCV because we are assuming a prepaid deal

SaaS Renewals Rate Analysis Copyright 2005-2013 Dave Kellogg and licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 Unite Here are the key metrics I would track Leaky Bucket Anaysis Starting ARR New ARR Churn ARR Ending ARR Renewals Rates Customers, count-based Seats, count-based, gross ARR-based, gross ARR-based, net Bookings-based, gross

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SaaS Renewals Rate Analysis Copyright 2005-2013 Dave Kellogg and licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 Unite

Here is a supplement that shows the nuance of annual price upflifts. Arguably, if the contract imposes an increased price ease as opposed to a cap, renewals rates should be calculated off what' Since the differences are relatively small and since most contracts impose a cap as opposed to an actual increase, few people Annual increase cap Multi-year discount Initial price 3% 15% 1,200 Year 1 1,200 1,200 1,020 1,020 Year 2 1,200 1,236 1,020 1,051 Year 3 1,200 1,273 1,020 1,082 Total 3,600 3,709 3,060 3,153

Flat price Increased price at annual cap Three-year price with discount off flat Three-year price with discount off increased

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d be calculated off what's contractually owed. tual increase, few people calculate it this way.

% of Flat 100% 103% 85% 88%

% of Increased 97% 100% 83% 85%

Copyright 2005-2013 Dave Kellogg and licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 Unite Revision 1.1 Renewal Rate Discount Rate 85% 3% Year 1 100 535 474 641 544 Year 2 85 Year 3 72 Year 4 61 Year 5 52 Year 6 44 Year 7 38

Value Sum (10 years) NPV (10 years) Sum (20 years) NPV (20 years)

Value could be either a stream of revenue starting with 100 units or a count of customers decaying with the renewal rate

Renewal Rate 75% 80% 85% 90% 95% 100%

Year to Cut in Half 4 5 6 8 15 n/a

Conclusions/Observations NPV in 10 year 85% renewal scenario is 474 Median lifetime is 6 years NPV in 10 years 90% renewal sceneario is 570 Median lifetime is 8 years

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Year 8 32

Year 9 27

Year 10 23

Year 11 20

Year 12 17

Year 13 14

Year 14 12

Year 15 10

Year 16 9

ing with the renewal rate

enewal scenario is 474

renewal sceneario is 570

Year 17 7

Year 18 6

Year 19 5

Year 20 5