"Enterprise" vs. "SMB/Mid-Market SaaS": Understanding Optimal Retention Metrics

In SaaS, both SMB/mid-market and enterprise-level companies must prioritize understanding and improving user and net revenue retention to ensure sustainable growth. However, distinguishing between GOOD and GREAT retention figures can be a challenge for many, including seasoned growth leaders, due to the scarcity of reliable, up-to-date benchmarks.

SMB and Mid-Market SaaS firms

For SMB and Mid-Market SaaS firms, a user retention rate of approximately 60% after six months is deemed GOOD; an 80% rate, however, marks a GREAT achievement. Similarly, while a 100% annual net revenue retention rate is considered GOOD, surpassing 120% indicates GREAT performance, reflecting robust market fit and successful upsell strategies.

Enterprise

In the Enterprise sector, expectations are marginally higher. A GOOD user retention rate is around 70% after six months, with GREAT retention reaching 90% or above. Financially, a net revenue retention of 110% is GOOD, but achieving 130% or more is considered GREAT, indicating strong customer loyalty and effective account expansion.

This nuanced understanding is largely thanks to the rigorous research and insightful discussions facilitated by experts like Lenny Rachitsky, alongside contributions from renowned industry figures including Andrew Chen, Andy Johns, and Brian Balfour. Their collective expertise offers a solid foundation for companies striving for effective scaling and sustainability.

Grasping key retention metrics is essential

Grasping these key retention metrics is essential for informed decision-making and strategic planning in SaaS businesses. Transitioning from GOOD to GREAT requires thorough analysis and dynamic engagement strategies, crucial for fostering long-term growth and enhancing customer satisfaction.