Expansion Revenue is Your Lifeblood

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You've got the questions, and we have the data

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Each week we dive deep on benchmarks of the subscription economy that you just can't get anywhere else

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This is the ProfitWell Report

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Yo, Patrick, it's Fred. As I sit here on my morning walk

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The top of Bernal Heights I find myself wondering what portion of my revenue

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should be up sell and expansion revenue?

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You're my kind of man Fred thinking of the subscription economy amongst nature, but to answer your question

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Let's look at the data from over 5,000 companies and 300,000 subscription consumers

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As to not bury the lede the answer is just straight up more more more MORE

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Expansion revenue is the lifeblood of a successful subscription business

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particularly when it comes to looking at growth.

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The most efficient companies were looking at an LTV 2 CAC ratio are actually fueling that efficiency mainly off of expansion revenue

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note that companies who have an LTV - CAC between 3 & 5 are seeing a median of just under 20 percent expansion revenue as

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a proportion of their total revenue

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those with an LTV - CAC above 5 are actually seeing 30 percent or more of their revenue coming from expansion that being said

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Efficiency doesn't tell the whole story

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Growth is important

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And if you're efficient you're not always investing in growth

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interestingly enough though companies growing in the top 40 percent of their cohorts are seeing at least

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roughly 20% of their revenue coming from expansion and a high-end of nearly 40 percent coming from expansion

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So to be blunt, more more and more is really an answer of at least 20%

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And you really should be shooting for closer to 30%

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We've seen a good crop of

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externalities for companies who have cracked this 30 percent threshold

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When it comes to expansion revenue ARPU tends to be growing at 2x the rate as those companies with expansion below that threshold

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Revenue retention is typically net-negative and even gross churn is typically half. Of course this data

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is highly correlative because to get proper expansion revenue with these levels you need good pricing good products and

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Ultimately you need to be using a value metric yet 20 to 30 percent can act as a solid North Star to benchmark your efforts

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That being said the answer is probably still more, more, and more.

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Well, that's all for now if you have a question ship me an email or video to PC@ProfitWell.com and let's also thank

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Fred for sparking this research by clicking on the link below to share on LinkedIn to give him a nice little shout-out

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We'll see you next week

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This episode of the ProfitWell Report is brought to you by

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Pricing Page Teardown where Patrick and Peter break down the pricing pages and strategies of

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Subscription companies from all corners of the market. Sign up right now to be notified as soon as a new episode is live