RVNU #009: Revenue vs. Retention: Vanity vs. Value

Is short-term revenue growth overshadowing long-term customer success in your sales team?

Notebook LM audio discussion of this Newsletter:

My second job in sales was door-to-door sales in Sydney, Australia. Over six months, I became highly skilled at getting deals done fast. But what I’m most proud of from that time isn’t the number of sales I made—it’s that not a single person I sold to ever activated their cooling-off period. After 10 days of reflection, every customer agreed I’d sold them a solution that truly met their needs.

In SaaS, while there isn’t a formal cooling-off period, I’ve always viewed the first anniversary of the contract—usually at the 12-month mark—as the real test of a deal’s integrity. And I find it hard to respect reps with a high churn rate at this point.

What’s worse, though, is how often we celebrate those reps who push for short-term wins, even when their customers inevitably churn. This mindset is not only misguided—it’s toxic for long-term SaaS growth. It’s time to stop rewarding short-sighted sales behavior and start measuring success where it really matters: in the lifetime value of the customers we acquire.

Introduction

This article breaks down the difference between a rep who excels at closing deals that churn after 12 months versus a rep whose steady, high-quality customers renew and expand. The math will show that while short-term wins are appealing, long-term customer retention and expansion is the lifeblood of a sustainable SaaS business.

Short-Term Rockstar vs. Long-Term Growth Builder

Let’s imagine two sales reps: Alex and Taylor.

• Alex is the short-term rockstar. He consistently hits his annual quota, closing $1M in deals every year, however the clients he wins average only a 50% renewal rate in the following years.

• Taylor is the steady performer. She brings in $750K in new deals, just below her quota, but her customers have an NRR of 130%, meaning they renew and upsell, creating compounding revenue over time.

In a traditionally managed sales team, Alex looks like the top performer, because the leadership only measure bookings. But over a three-year period, Taylor’s focus on long-term relationships and customer value tells a different story.

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Step 1: The Revenue from New Business

Both Alex and Taylor bring in valuable new business in Year 1. Alex, the high-flyer, closes $1M in deals. Taylor, the steady builder, closes $750K.

Year 1: New Business

• Alex: $1,000,000

• Taylor: $750,000

From a pure acquisition perspective, Alex looks better. But SaaS success isn't just about closing deals; it’s about keeping customers and growing those accounts.

Wayne’s candid take: “The least sophisticated SaaS companies force marketing to pump the team with unqualified leads and force reps to close anything that comes their way regardless of whether they meet the ICP, and they don’t track retention by rep post the first 12 months. The most sophisticated measure lead quality, hold marketing accountable to revenue goals and measure retention post sale in order to determine leading renewal indicators in order to compensate reps on those indicators - such as high value feature adoption within 3 months of a contract closing.”

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Step 2: Customer Retention and NRR

Things get interesting when you make the effort to measure revenue retention by sales rep after the first anniversary of the contract. Alex’s customers churn at a 50% rate in Year 2 and 50% again in Year 3, meaning he retains half of his Year 1 customers in Year 2, and half of those customers in Year 3. Taylor, however, retains her customers and sees them expand by 30% year over year (130% NRR).

Year 2: Renewals & Upsells

By Year 2, the difference becomes clear.

• Alex: $1,000,000 × 50% = $500,000 in renewals.

• Taylor: $750,000 × 130% = $975,000 (original customers plus 30% upsell).

Year 3: Renewals & Upsells Compound

In Year 3, the gap widens even further, as Taylor’s customer base continues to grow, while Alex’s renewals continue to drop.

• Alex: $500,000 × 50% = $250,000.

• Taylor: $975,000 × 130% = $1,267,500.

The Long-Term View

Here’s what happens when we add up the results over three years:

In this scenario, Taylor brings in nearly 2x more revenue over three years despite starting with less new business in Year 1. Her ability to retain and grow her accounts through renewals and upsells creates compounding value that far surpasses Alex’s one-time wins.

Wayne’s candid take: “lazy one-dimensional sales leaders who don’t really care about the long term success of a startup will argue that their job is getting deals closed. Sophisticated revenue leaders understand and care about the wide-ranging long term impact of winning high quality deals that sustain for multiple years. One of the clearest signs of a dysfunctional GTM org is a high volume of churn at the 12 month point. It’s also one of the easiest things to fix, and typically requires a change of revenue leadership in order to force the required cultural shift.”

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The Real Cost of Short-Term Wins

The cost of Alex’s churn doesn’t stop at lost revenue. In SaaS, customer acquisition is expensive, and replacing churned customers requires continuous reinvestment into marketing, sales, and onboarding. This dramatically increases customer acquisition cost (CAC) and puts pressure on the sales team to find and close new customers constantly. Over time, this increases burn, puts strain on resources, and results in a less predictable revenue stream.

Worse still, the company could end up in a revolving door of sales reps, where quotas are hit in the short term but never sustained. This strains the sales culture, increasing turnover, and forcing more investment into hiring, onboarding, and ramping new salespeople.

Why NRR Matters for SaaS Valuations

In SaaS, long-term success is driven by net revenue retention (NRR), a key metric investors look for when valuing startups. NRR measures how much revenue growth comes from your existing customers, including renewals and upsells. A high NRR (anything above 100%) signals to investors that your product delivers long-term value, and that customers continue to grow with your solution. It also lowers customer acquisition costs (CAC) because your existing customer base is fueling growth, reducing the pressure on acquiring new customers constantly.

Startups with high NRR tend to receive higher valuations because they have predictable, recurring revenue streams and lower churn, which de-risks the business. Investors value growth, profitability, and revenue retention. Focusing on acquiring customers that renew and expand is crucial for maximizing enterprise value.

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Conclusion: Reevaluate What Success Looks Like

The bottom line is that long-term customer value is what truly defines success in SaaS, and there’s no real reason why sales reps can’t be on the hook for revenue beyond the first 12 months. It’s down the leadership wanting to build value vs vanity.

Sales reps who prioritize customer retention, renewals, and upsells generate far more revenue over time than reps who focus on hitting immediate quotas without regard for the longevity of the customer relationship.

For SaaS companies to succeed, sales teams must be evaluated not just on how they perform in the first 12 months, but how much value their deals bring in over the lifetime of the customer.

It’s tempting, especially earlier in the lifecycle of a SaaS company, to ignore this metric and focus on top-line revenue because net new often outguns renewal and expansion revenue in the first few years of a startup, however this is hubris, for all of the reasons discussed.

As you grow your sales team, consider what kind of culture you want to build: one that celebrates immediate wins but struggles to sustain growth, or one that rewards long-term value creation.

The numbers speak for themselves.

You got this 👊🏼

Wayne

Founder & CEO
RVNU