the three saas levers that drive growth and keep you from plateauing
TRANSCRIPT
The Three SaaS Levers that Drive Growth and Keep You From PlateauingLars Lofgren
@larslofgren
I’ve built Growth Teams at:
1. World-class churn
2. Revenue expansion from each cohort
3. Accelerating acquisition at the right time
3 Fundamental Growth Levers for SaaS
You plateau if all 3 don’t work together
Also plateau if you build in the wrong order
Conquering Churn
• 2-3% or less = on target
• 3-5% = not there yet, double down on product and onboarding
• 5-10% = Major P/M fit gap
• 10% and above = business is on fire
Monthly Churn Benchmarks
• Remove self-service cancellation
• Fix product onboarding
• Push annual plans
• Force annual plans
• Reaching out to inactive accounts
• Downsell campaigns
• Prioritize support for large accounts
• Onboarding programs with 30/60/90 goals
Popular churn reduction ideas
Bad Marginal Major Wins
Remove self-service cancellation Push annual plans Fix product onboarding
Contact inactive accounts
Support ticket prioritization
Improve product value
Downsell campaigns 30/60/90 onboarding programs
Wait, what about forced annual?
If there’s an established norm of forced annual in
your category, use it.
Marketing automation has an established norm
Misapplied, forced annual drops your funnel off a cliff
Improving P/M fit and onboarding are your most reliable levers for churn.
• Very disappointed
• Somewhat disappointed
• Not disappointed (it isn’t really that useful)
The P/M fit question from Sean Ellis:
How would you feel if you could no longer use [product]?
40% of respondents should say “Very disappointed”
51% 72%
Cohort Expansion
As customers grow revenue, so should you
Your expansion revenue depends on the quality of
your pricing metric.
Salesforce seat metric is a cash machine
When seat pricing does NOT work
• Attendees = makes sense, easy upgrades
• Organizers = limits are annoying, resist upgrading
Match your pricing metric as closely to your product
value as you can.
Expansion engine + low churn = negative churn.
What is negative churn?
Revenue from each cohort expands faster than the revenue lost from that
cohort.
Let’s recap:
• We’ve focused heavily on P/M fit to get super low churn.
• We’ve found the pricing metric that easily convinces customers to pay more.
• Low churn + expansion revenue means we’re stable or growing without any acquisition.
• Now our acquisition is 100% upside.
Acquisition
You should already have steady organic growth by
now from P/M fit.
Lots of lead gen paths:
• Inbound and content funnel
• Cold calling and outbound
• Events
• Partnerships
• Paid marketing
• PR
• Affiliates
• Viral loops
• Social
All of these can work if you get the execution right.
Hence the advice:“double down”
10% month over month lead growth
What happens if we pursue acquisition too early?
Acquisition can’t outrun high churn forever
If the majority of your acquisition goes to
replacing lost MRR every month, you will plateau.
Funnel also suffers: the alligator sales funnel
Leads growing at 10% MOM, new customers constant at 100 per month
0
1,250
2,500
3,750
5,000
Jan Mar May Jul Sept Nov Jan Mar May July Sept Nov
Qualified leads New logos
Marketing can dodge a bad product, sales can’t
The alligator funnel is nasty. Marketing and sales will
blame each other.
Usually a product problem. This is why we focus on
churn first.
1. Make sure you have P/M fit and low churn
2. Get cohort expansion in place with a great pricing metric
3. Build your lead gen machine at the right time
Your growth levers, step-by-step
