Making customer count a prime metric

Net Revenue Retention (NRR) has been a key indicator of business health in SaaS for a long time, and for good reasons. It tells you how well you’re expanding within your existing customer base. But while NRR is a highly valuable metric, it can also be misleading, because it may mask challenges, especially when it comes to acquiring new customers. That’s why you may consider shifting your focus to something more fundamental: the number of (good-fit) customers.

Don’t over-rely on NRR as the main indicator of success

A high NRR can make a company look successful on paper, but if customer acquisition is stagnant, focusing too much on NRR might make you ignore signs of trouble. In addition, relying too heavily on expansion revenue within an existing customer base creates a ceiling on growth. Eventually, there’s only so much revenue you can farm from our current customers, no matter how much value you add. 

While retaining and expanding within your customer base remains important (Hannon Hill‘s retention rate in the last two years exceeded 97%!), sustainable long-term growth depends on consistently bringing in new customers. By prioritizing customer count as a key metric, you ensure that your business remains viable and competitive.

Why customer count helps paint a truer picture

Of course, it’s not all about customer count, and we all know that getting a new customer signed just for the count without considering if they fit into your ideal customer profile is a flawed approach. However, let’s look at some of the benefits of identifying the number of customers as a key metric. 

• Driving new business and competitiveness
  Expanding your customer base means actively selling your product to new organizations. This not only generates new revenue streams but also reinforces the value and relevance of your offering in the market.
• Building a more expansive customer community
  More customers mean a broader range of success stories, testimonials, and case studies. A thriving customer community adds credibility, strengthens brand advocacy, and enhances your ability to attract even more customers.
• Enabling better product decisions with diverse feedback
  A growing customer base provides a more diverse set of perspectives, use cases, and challenges. This variety helps you make more informed product decisions, ensuring your platform evolves in a way that benefits a wide range of users.
• Ensuring long-term sustainability
  A business that prioritizes new customer acquisition (again, only if the customer is a fit – don’t pursue bad fits, as this is a lose-lose scenario) is better positioned for long-term success. Over-relying on upsells and expansions can create an illusion of growth, but without a steady influx of new customers, churn and market saturation will eventually limit progress.

Of course, retention still matters – a lot

This shift in focus doesn’t mean retention no longer matters. Keeping existing customers happy is still critical. However, retention should support, rather than overshadow, the primary goal of increasing your customer count. A balanced approach ensures that you continue to provide value to your current customers while also expanding your reach.

At the end of the day…

Ultimately, long-term success in SaaS isn’t just about getting more revenue from your existing base by providing more value, but it’s about continuously bringing new organizations into your ecosystem. By making customer count a core metric, you may better position yourself for sustainable, scalable growth. 

What are your thoughts?