Every October, I wait with bated breath for the release of my favorite SaaS benchmark: the Pacific Crest SaaS Survey. The report incorporates confidential financial data from hundreds of SaaS businesses (including mine!) to provide insights into the financial and growth mechanics of the SaaS industry. This year’s report was no exception.

One aspect of this year’s findings that caught my eye was a common theme around the importance of upselling and customer success. More and more, we’re seeing the most successful companies pouring money, time, and energy into the growth of their existing customer base, often pulling those resources away from new business development in order to do so. As this trend continues to pick up steam, I think there’s a good chance that 2016 will be the year of the upsell in SaaS. Here’s some data from the report that tells us why.

Upsells key to growth and scale

As shown in the chart below, companies that have made it past the $40MM revenue mark use upsells to drive a much higher percentage of their new Average Contract Value (ACV) than smaller companies. In fact, companies in the $40-75MM revenue range attribute twice as much new revenue to upsells as the median company.

Of course, it’s dangerous to imply causation here. There are a number of reasons why we might see this effect in later-stage companies. One unexciting possibility is that their overall growth in new business is slowing down and it’s skewing these percentages in favor of upsells. Let’s look at this data through another lens and explore how upsells are related to growth.

Here, we see a clear link between top growth performance and upsells. This happens not just at these later stages but earlier on as well. Indeed, companies that focus more on upselling are consistently growing faster. In past reports, this link between upsells and growth wasn’t nearly as prominent among companies with less than $10MM of revenue. As the study explains, “Now the fastest growing smaller companies are also focusing on upsells.”

CAC is much lower for upsells

The findings here should be intuitive to anyone who has run a SaaS company: It’s less expensive to acquire that next dollar from an existing customer than from a new one.

In fact, the median Customer Acquisition Cost (CAC) for upsells is just $0.28 per $1, less than a quarter of the $1.18 spent to acquire $1 of revenue from a new customer. This has a huge impact on unit economics and begins to explain why winning companies place such a large focus on upsells as they mature. The bigger your customer base, the bigger the opportunity to move the needle through upsells.

Companies with the best unit economics focus on upsells

If I’ve learned one thing building my SaaS company, it’s that unit economics are king. (Check out this episode of my series Data Point of the Week to hear more). In the comparison below, the Pac Crest team shows us the difference between a company with best-in-class unit economics and the rest of the pack. The differences are staggering, and it’s no surprise that upsells are one of the most divergent metrics between the two groups.

As you can see, the best companies derive 26% of new ACV from upsells, while that number is just 19% for everyone else.

Onward and Upward!

Upsells aren’t always easy, and depending on the dynamics of your business model they may not even seem like an option. I believe the average company focuses so much on growth through new accounts because that path seems larger, more obvious, and, frankly, easier. But, as we all know, oftentimes the hard thing to do and the right thing to do are one in the same.

Even if upsells seem like a pipe dream today, you can make decisions that set you up for long-term upselling success. To get started, you can read our ACV benchmark and martech pricing study and think about how your company can structure relationships and deals to allow for long-term account growth. With long-term growth and amazing unit economics on the line, teeing up success through upsells is well worth the investment.