Account Retention Rate (LTM)

What is Account Retention Rate (LTM)?

Account Retention Rate is a critical metric that measures the percentage of accounts or customers, often referred to as "logos" in B2B, that a company successfully retains over a specific period, particularly focusing on the Last 12 Months (LTM).

Why is it Important to Measure Account Retention Rate (LTM)?

Account Retention Rate (LTM) is of significant importance for businesses, especially Software-as-a-Service (SaaS) Business-to-Business (B2B) companies that invest heavily in customer acquisition during their early stages. Here's why it's crucial:

• LTM Focus: Account Retention Rate (LTM) assesses the continuity of customer relationships over the Last 12 Months, providing insights into recent customer retention trends.
• Health and Sustainability: A high Account Retention Rate (LTM) indicates that the company has successfully retained a significant number of its existing customers during this specific period. This reflects positive customer loyalty and effective retention strategies.
• Growth Prospects: Conversely, a low Account Retention Rate (LTM) can be likened to a "leaky bucket" scenario, where the company continuously acquires new customers but struggles to retain them over time. This situation can negatively impact long-term growth prospects.
• Improvement Insights: Measuring Account Retention Rate (LTM) helps identify areas that require improvement in customer support, product offerings, or overall customer experience, contributing to sustainable business growth.

How is Account Retention Rate (LTM) Calculated?

Account Retention Rate (LTM) is calculated as a percentage of the starting active accounts from the previous 12 months, accounting for changes due to Churn and Contraction during this specific period.

Formula

Account Retention Rate (LTM) =Starting Active Accounts (12 months ago) - Churn - ContractionStarting Active Accounts (12 months ago) This formula provides insights into how effectively the company managed to retain its existing customer base over the Last 12 Months, irrespective of revenue considerations.