Episode 1 1:52 November 18, 2021
The Impact of Net Revenue Retention (NRR) on Your SaaS Business

In this Episode

For subscription-revenue companies, dipping Net Revenue Retention (NRR) almost always results in your Cost of Sales going up.

Transcription

PRITHWI:
NRR does impact overall cost and profit—that we have seen. What sort of an impact does it actually have on the cost of sales? So, my opinion Andreas is, eventually, if your NRR is dipping, your cost of sale will go up, and any thoughts on that?

ANDREAS:
Oh! Yes, absolutely. So, let me at first share some numbers on the cost of sales. Again, looking at the corporate filings of private companies about to go public, the cost of sales is really between… original subscription value of one dollar… you spend between ninety cents and two and a half dollars in acquiring a customer.

That means that roughly it takes you between one and three years just to recoup the investments that you made in sales and marketing. We are not even talking about profit yet. We are just talking about breakeven. That is one effect.

And then, of course, if you’re seeing that your existing customers are fading away, if you are taking that approach, and you become more and more desperate, and you spend more and more time in sales and marketing in acquiring new customers, then your cost of sales basically goes up even more.

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