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Cohorted Retention

Cohorted Retention groups customers by sign-up period (cohorts) and tracks how they retain over time.

Cohorted Retention for period x = ARR (or count) of customers in a given cohort in period x ÷ ARR (or count) of customers originally in that cohort

Example: The January 2023 cohort's Month 3 NDR is equal to the ARR from the Jan 2023 cohort in April 2023 / ARR from the Jan 2023 cohort in Jan 2023

You can also look at the weighted average retention of all cohorts at a certain age, such as month 12.

Example: Weighted Average 12 Month NDR is equal to the ARR from all cohorts at least 12 months old in month 12 / the original ARR from all cohorts at least 12 months old

Retention by cohort is important because it allows you to see how customers behave at specifics points in the customer journey. Since many SaaS companies sell annual contracts, looking at retention at months 12, 24, 36, etc. helps show how renewals impact retention. When projecting how new customers will behave, cohorted retention helps show what they have done historically. For example, you may notice your customers have early expansion followed by flattening out, early churn that levels out after a few months, etc. Reading cohorted retention charts diagonally can also reveal what happened at a specific point in time, versus a specific cohort age.

Types: Net Dollar Retention, Gross Dollar Retention, Logo Retention

Settings: Segments, Date Range, Date Aggregation, Cohort Retention Baseline, Revenue Type

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Stage Conversion Rate

Stage Conversion Rate is the While Pipeline Value sums the total ARR of active opportunities in pipeline, weighted pipeline is weighted based on the current deal stage. Weighted pipeline value is a more accurate estimate of Closed Won ARR based on the current pipeline value.

How do I calculate pipeline?

Let's assume we have the following list of opportunities currently active in our sales process:

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Deal Name

Sales Owner

Stage

ARR

ACME Corp. - New Business
Bugs Bunny
Stage 1
$10,000
Bonner Books - Upsell
Bugs Bunny
Stage 2
$25,000
CHOAM - New Business
Daffy Duck
Stage 2
$15,000
Daedalus Research - Upsell
Daffy Duck
Stage 3
$30,000
Bugs Bunny
Electric Enterprise - New Business
Stage 3
$50,000
$20,000
Fabulous Factories - New Business
Daffy Duck
Closed Lost

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The total pipeline for these opportunities is $130,000. Additionally, we can also get pipeline totals for our two sales reps: Bugs Bunny ($85,000) and Daffy Duck ($45,000).

Note that Fabulous Factories - New Business is omitted from this sum, as the stage is marked as "Closed Lost".

We can summarize our pipeline by Stage to understand how much ARR is in each step of the sales process. To summarize the Pipeline ARR by Stage, we generate the following ARR table:

Stage 1 Pipeline

Stage 2 Pipeline

Stage 3 Pipeline

Total Pipeline

$10,000
$40,000
$80,000
$130,000

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While we have the total pipeline value here, we can apply the weightings to more accurately estimate how much of the pipeline ARR will be Closed Won.

What is probability to close?

Probability to Close is a percentage that estimates how much of the ARR that is in a particular stage of a pipeline is expected to be Closed Won. Typically, Probability to Close will be lower in earlier stages of the sales process and higher in later stages of the sales process.

If we multiply the probability to close by the Pipeline ARR, we'll get the Weighted Pipeline ARR value in each stage.

Stage 1

Stage 2

Stage 3

Pipeline ARR ($)

$10,000

$40,000
$80,000

Probability to Close (%)

25%
40%
65%
$2,500
$16,000
$52,000

Weighted Pipeline ARR ($)

Probability to Close assumptions for each stage assume that deals in different stages have a different chance of being won. Deals in Stage 1 are 25% likely to be won, while deals in Stage 2 are 40% likely to be won, and deals in Stage 3 are 65% likely to be won.

After applying the probability to close to the Pipeline ARR, we now have $2,500 in Stage 1, $16,000 in Stage 2, and $52,000 in stage 3, for a total weighted pipeline value of $70,500. This estimate is closer to the real value we expect to have in Closed Won ARR.