SaaS Renewal Rate

Sometimes you hear people in SaaS talk about their Renewal Rate and you wonder what they exactly mean. This post will help you understand, calculate and define SaaS Renewal Rates.

Before you read this post we recommend you reading our short post about Calculating SaaS Churn

This blog post will cover the definitions for:

SaaS Renewal Rate ($)

1. Renewal Rate (#)

Count Renewal Rate is defined as: # of customers who renew their contract / total number of contracts up for renewal

Example 1: you have 100 clients,10 are coming up for renewal this month, 2 of them churn

Your renewal rate is 80% (8/10)

2. Renewal Rate ($)

Dollar Renewal Rate is defined as: the total value of renewed contracts / total value of contracts up for renewal

Example 2: you have 100 clients, they all pay $12,000 for a 12 month contract ($1,000 MRR),10 are coming up for renewal this month, 2 of them churn

Your renewal rate is: 80% ($8,000 MRR / $10,000 MRR)

Example 3: you have 100 clients, they all pay $12,000 for a 12 month contract ($1,000 MRR),10 are coming up for renewal this month, 2 of them churn but you manage to up-sell one of them (from 1,000 MRR to $4,000 MRR)

Your MRR Renewal Rate is: 110% ($11,000 MRR / $10,000 MRR)

The key take aways:

1. Count Renewal Rate can, at its best, be 100%

2. Dollar Renewal Rate can (and should be!) more than 100% for a SaaS business.

Read Dave Kellog's post here if you want to drill deeper into this metric