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Negative Churn

We just closed another great quarter at Intacct, and I'm extremely proud to report that we had 100% customer retention for our direct sales channel the quarter. This is no mean feat for a business of our size and growth - more than 2,500 customers in all and well more than 100% year over year growth.
And because our clients tend to purchase new users or new services when they renew their subscription, we achieved more than 100% of recurring revenue from our customer base - in other words we had negative churn in the quarter.

To me this says that all the investments we have been making in client satisfaction are paying off. I see it as particularly good because there has been quite a bit of news around ERP failures lately - the latest being Waste Management's suit against SAP for their ERP disaster, and Dennis Howlett's post about very high levels of customer churn at NetSuite.

Negative churn is a term I first remember hearding in a board meeting at Postini - we had a great customer retention quarter and our board member from Bessemer Venture Partners looked up and said "Do you mean we actually had negative churn?" We all thought that was a pretty good term. I like the work that the team at Bessemer is doing around promoting SaaS metrics like MRR - Monthly Recurring Revenue - as the key metric to run a Software as a Service business by, and it's obvious that driving near zero or negative churn is the key to achieving healthy MRR. What's interesting to me is that as I attend various SaaS events, I don't always hear people thinking a lot about telco like / subscription based terms- I supposed between Postini and Intacct I've learned to manage the business by focusing on MRR, Churn, ARPU (Average revenue per user) and ARPC (Annual revenue per client) - with a whole lot of focus on cost of client acquisition, cost of service and operating margins and it's now become ingrained. This is one of the reasons I really like the SaaS model - if you dial in the metrics and make sure the whole company is staffed and incented to delight your clients the rest of the business almost takes care of itself.


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