Edited excerpt from Why Tilting Just a Smidge from Self-Service Can Grow Your Revenue 30x by Jason Lemkin:
If your product is 100% individual-focused, and you add just enough features to sell to a Team, to tilt just slightly upmarket — you can grow your revenue, at least a segment of your revenue, by 20-30x.
Why? The key is a combination of (x) churn and (y) value. Virtually every self-service, individual seat web service churns at a relatively high rate — from maybe 2.5% a month at best, to 3.5% or 4.0% a month or more in many cases. So that means maybe your customer lasts 8-10 months, maybe a bit longer but not too much.
Now, come up with a slight extension of that same product, wherein some group, team or segment of an entire enterprise can use it together. Let’s call it just 5 seats to start, instead of 1. Maybe you add management-level analytics. Some sort of collaboration. I’m not sure what it will be for you. But let’s call it the most basic features necessary so a team or a group will buy, instead of an individual user.
And what you’ll find is epic on the churn side. Your churn as the deal gets just a smidge bigger will fall dramatically, toward 1-1.5%. And as you add more seats, the churn will trend toward 0% and eventually become negative. Because your customers will add more seats over time than they cancel.
All of a sudden, in say a $30/month product … you’ve gone from a $240 Customer Lifetime Value for the single seat purchase to $5400 CLTV over 3 years from the same customer, from the same basic core product, just with whatever additional functionality you need for your Team or “Enterprise” edition.