editor’s note: this article from the famous red dot throws the Tom Tunguz , Chinese version from the heavens and the earth will point zhuhai rudder compilation (public) : techgogogo ). You how to calculate your own startups user turnover? Lost count how many users per month? That can’t catch the point, because there are big clients or small clients. Up to sales? The biased because chances are you a single user will bring you a lot of sales, and give you a false prosperity of scenario, the fact that can’t see the huge loss of user. Here we see the author inadvertently KuiPo ServiceNow user turnover rate calculation secret…
before preparing for the world’s third largest SaaS company ServiceNow listed their registration statement (S), I happened to be in what they called “the key factor of influence our benefit” the recent annual report, pay attention to in the turnover of the company used to calculate users in two ways. One of the slightly more common, but another is very effective to SaaS company added simple and entirely new way of calculation. But first let me in the face of these two approaches described in the report to provide out:
? Up sales: from customers who have bought our service make more sales for our growth plays an important role, we called it “up sales (Upsell rate)”. This is how we calculate our sales up: the annual contract value produced by up-selling (annualized contract value, also called ACV on the basis of excluding any escape from the damage caused by the user, all users sign divided by the period of ACV (heaven and earth will zhuhai middle note: that is to say, up sales=(upsells ACV – escape from user loss listed ACV/total contract ACV. Listed For example, if you’re a called cool video content provider, you have 100 subscribers last year, each user bought 1000 yuan/year “average user” License. By upward sales approach, this year you told these users “average user” accounts can only see the Japanese action movies or Japan romance, we now offer “advanced user” accounts can watch “love action” in Japan, can also provide a limited number of sora O2O service oh, just the price to add 500 yuan. Such seduction 20 users to upgrade their License to “advanced user” account. At the same time, and 10 patriot heard that there was no domestic love action movies to see, no renewal, fled. So here you can up sales of such calculation: upward sales=((20-1000 x 500 x 10)/(1000 x 1000 x 90 + 20)=0%. That is to say, you sell up the money I earned just enough to fill your users loss caused by the loss of the pit.). Our company in the last day of 2014201, 3201, 2 up sales are respectively calculated by 36%, 31% and 30%. Our sales up mainly comes from our customers to purchase more License and user subscription to other paid services.
? Contract rate: we calculate way is to use contract rate 100% minus our users to escape rate. Our users refer to escape rate, the escape from the user as a result of ACV loss listed, all divided by the period of contract users of ACV and escape from the loss of ACV combined listed users listed… So we over the years the corresponding contract rate is 97%, 96% and 97%.
more upward sales is through the so-called “reverse users escape rate (Negative) Churn” calculated by the way, this method is widely used in many SaaS start-up companies.
“reverse customer churn rate” this concept is difficult to define, so we’ll go by describing it to the impact of start-up to figure out what it is. Below are said to a hypothetical SaaS company description of income growth in 2014. The start-up has 100 new customers every month, every user will pay the cost of us $1/month to use the company to provide products and services. What is called, you will lose the company every month, of course, there will be a loss of users, here we assume that is the turnover rate of 5% per month, so it looks like, in January 100 new users in, by the end of December, is only about half the rest of the people. The people in the picture can be seen clearly.
and at the same time, we have a look at another has shown in the figure below 5% “reverse customer churn rate” of the company. What does that mean? Said is the company turnover is 5% per month, but we keep the remaining 95% of the users in the case of normal monthly payment will spend additional 10% of the money to buy other services (up the achievement of sales), so the total revenue is changed to 105%. So it is every month loss, but the company did not stop growing, on the contrary still has a growth rate of 5%.
but this way also has some disadvantages, if use it alone to judge the health of a company, may lead to miscalculation.
, for example, some users, if a man bought a number of services for your company, your sales up is very high, even could reach 100%. But if at the same time each month presented.according to 10% of the users, even when you are the sales rate of 100%, up your start-up must be problematic.
so in addition to using this way, the number of start-up companies also tend to flee to the user, in order to see clearly the above said to just because some one buy in large quantities of sales rising up the false illusion of prosperity.
but the number of escape by calculating the user also has a problem, because if you the start-up of the user is very diversified, with a lot of heavy users, with some even lost innocuous little user, then fled part of these small user may can let a person feel your start-up users escape rate is too high.
so what ServiceNow brought out and the calculation method of the renewal rate is the number of users to escape this calculation method is a good substitute. This way, won’t make a handful of users of consumption to cover up the escape from the fact that at the same time can well reflect the health of your business.
so, as I mentioned earlier, when we will have our contract rate, please use the following formula:
contract rate = 100 % – to escape from the customer ACV listed / ( fleeing customer ACV listed + total contract user ACV listed )
you can try to this renewal rate into your SaaS start-ups, believe that will make you more clear clear about your users, bring you unexpected surprises.