This post is by Jason Lemkin from SaaStr
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It took me a little while to see activation rates as literally one of the 3-4 most important metrics in SaaS, but it probably is. I started to track activation rates at a lot of start-ups I work with, and I saw numbers that shocked me. I often say 60% or so activation rates 30 days in. Think about that. That means after all the time and money put into building your product, marketing your product, trialing your product, demo’ing your product, selling your product, closing the deal, celebrating … and then … a ton of those customers are immediately at risk. Why? They don’t deploy. I don’t have a perfect metric, but after working on this with a dozen+ SaaS companies recently, I have a simple heuristic: 90% or more of your customers need to activate in the shortest practical time. And you to track this, measure it, and discuss it weekly. Every week. If you don’t, so much of that hard work is down the drain. The exact amount of time can vary. In some cases, it should be the day they pay, e.g. an in-app purchase or an upgrade from free to paid. For many apps, perhaps it takes a week. If there is real business process change, it might take a full month to deploy into production. It’s also important to distinguish between a limited pilot and true deployment, lest you take your eye off the ball here as well. And ideally, you’d track not just activation, but also % deployed as well in bigger deals. But just starting with activation and tracking it as a north star metric is enough. Whatever the shortest time the team can agree makes sense, start measuring it now. What I can tell you is over 80% of start-ups are shocked how low their activation rates are, once they are faced with them as a core metric for discussion. Importantly, activation rates are always lower than people think intuitively. Yes, folks anecdotally know some of the customers that haven’t deployed. But they rarely have a 360-view of how many, and why. Put differently, almost everyone is doing worse here than they think. The best way to grow your revenue in SaaS is to keep the revenue you do have. That’s the magic of compounding revenue. And the simplest way to make that happen is to make sure all your customers go live as soon as possible. At least 90%. While B2C can be different, for a B2B app, why should it be less? And then make sure you have clear action plans for the other 10%. The post The Silent, Lurking Churn: Activation Rates Less Than 90% appeared first on SaaStr.