“...companies growing in the top 40% of their cohorts are seeing at least roughly 20% of their revenue coming from expansion and a high end of nearly 40% expansion revenue.”
Our Key Takeaways
- The more efficient a company, the greater the percentage of sales that comes from expansion revenue. Companies with an LTV/CAC ratio of <2 generate 6% expansion revenue; 2-5 generate 19%; and >5 generate 32%.
- 20% to 30% percent expansion revenue is a good guiding benchmark, but as a rule of thumb, the higher percentage of expansion revenue, the better.
- High efficiency and rapid growth can be competing goals, but the fastest-growing companies still see at least 20% of sales revenue come from expansion with some high-growth companies hitting almost 40% expansion revenue.
Why We Think This Matters
As Mark Cranney explains, “while new clients are great, the best place to sell something is where you’ve already sold something.” To turn existing customers into champions and generate expansion revenue:
- Align your sales strategy to your customers' strategic business objectives.
- Help customers overcome inertia and prepare different messaging for each internal stakeholder.
- Create a quantifiable business case for the expansion.
Summarized by Reforge. Original article by Patrick Campbell • CEO @ ProfitWell