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This is a great question that requires a sophisticated approach due to the many variables that affect the number we are trying to calculate. In this video, we'll explore how to think about your retention profile and what it takes to maintain or improve your net revenue retention for the next fiscal year.
Key topics covered:
– Understanding retention profiles: we will start by discussing how to maintain, for example, 100% or 110% net revenue retention and what should be reserved from an expansion perspective (MRR, ARR) for achieve these objectives.
– Forecasting and Planning: We will explore how to plan for an increase in net revenue retention to 115% and the expansion bookings needed to reach this level.
– MRR/ARR Waterfall: Learn the importance of having an MRR/ARR schedule, including starting balance, new expansion, contraction and churn. We will need at least 24 months of history for accurate analysis.
Current Retention Profile: We will analyze your current retention profile and MRR/ARR layers to predict the expansion required to maintain or improve retention.
– Variable and Sensitivity Analysis: Learn how various factors such as new business, contraction, and churn impact your revenue retention and how to make assumptions for the upcoming calendar year.
– Goal Setting: Understand how to set realistic expansion goals for your customer success and account management teams, ensuring they align with your net revenue retention goals.
To help you further, I've provided a link in the show notes to a free video lesson and downloadable template that will walk you through the process of calculating your SaaS business. This template will help you visualize the concepts covered in this video.
Video lesson and template (under retention module): https://www.thesaasacademy.com/offers/gmbMDsYN/checkout
Why this analysis is important:
This advanced analysis helps SaaS companies define accurate and achievable expansion goals, which are crucial to maintaining or improving net revenue retention. By understanding the variables and performing sensitivity analysis, you can better predict and plan for the future, ensuring your SaaS business continues to grow and succeed.
Stay tuned for more advanced analytics and insights on SaaS metrics!
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