A recurring challenge observed in many B2B companies is the tendency to conceal a slowdown in net new customer acquisition, a practice that often leads to long-term negative consequences. Net new customer growth is widely regarded as a critical metric for assessing a company’s market relevance and future prospects. However, when this growth begins to decelerate, some companies resort to strategies that maintain revenue growth superficially while underlying customer acquisition weakens.
Common tactics include increasing prices on new deals by 20-30%, introducing premium product tiers to encourage upgrades, emphasizing expansion revenue to boost net revenue retention (NRR), and securing multi-year contracts with discounts to improve bookings and cash flow. These approaches can sustain revenue growth for a few quarters but essentially represent harvesting existing customers rather than cultivating new ones.
A related issue arises when Chief Revenue Officers (CROs) focus heavily on price increases to meet short-term targets. In many organizations, revenue from price hikes is credited equally with revenue from new customer acquisition or expansion, incentivizing CROs to prioritize price increases. This strategy does not require winning competitive deals or product innovation but extracts more value from the current customer base. In some cases, price increases have accounted for over half of year-over-year growth, masking declining product usage and rising customer acquisition costs.
This approach carries risks, including delayed customer churn as clients seek alternatives 6 to 18 months after price hikes, increased vulnerability to competitors offering lower prices, reduced product innovation, and a sales team less focused on competitive selling skills. To address this, companies should separate and distinctly track revenue from price increases versus new business revenue, reporting both transparently to stakeholders.
Net new customer growth serves as a leading indicator of a product’s market relevance. Several leading SaaS companies demonstrate strong customer acquisition alongside revenue growth, such as those adding tens of thousands of new customers quarterly and achieving double-digit percentage increases in both revenue and customer counts. Conversely, some companies show signs of stagnation or decline in high-value enterprise customers despite overall revenue growth, indicating a reliance on expansion within existing accounts rather than new customer acquisition.
Examples include companies with flat or declining enterprise customer counts, slowing revenue growth, and high net retention rates that mask underlying customer base contraction. These firms often shift focus to usage-based pricing, operational efficiency, or extracting more value from existing customers, a mode commonly referred to as “harvest mode.”
When net new customer acquisition slows, it often signals challenges such as increased competition, insufficient innovation, or misaligned market targeting. High NRR can obscure these issues temporarily, but eventually, expansion opportunities diminish, leading to stagnant revenue and product stagnation.
A useful benchmark is maintaining a ratio of revenue growth to new customer growth of at least 2:1. For example, a company growing revenue by 50% should aim to increase its customer base by at least 25%. Falling below this ratio suggests overreliance on existing customers and potential future risks. Leading companies typically achieve 20% or higher new customer growth at scale.
Scenarios illustrate that focusing on customer acquisition yields compounding growth and market presence, whereas relying on price increases may produce short-term revenue gains but slower long-term growth and market penetration.
Market valuations reflect these dynamics, with companies maintaining strong customer growth commanding higher multiples, while those with flat or declining customer bases trade at lower multiples despite positive revenue growth.
Companies experiencing slowing net new customer growth should critically assess their competitive positioning, win rates, sales cycles, and customer feedback, especially from prospects lost to competitors or opting for no change. Investment in product development and market alignment is essential to regain growth momentum.
While price increases and contract strategies offer controllable levers, net new customer acquisition remains vital for sustainable growth. Setting clear net new customer goals, tracking them rigorously at the board level, and balancing expansion efforts with customer acquisition are key to maintaining a healthy business.
In summary, net new customer growth is a fundamental metric for B2B SaaS companies. Masking its decline with pricing strategies and expansion revenue can delay but not prevent eventual business decline. Transparent tracking and a focus on acquiring new customers are critical to long-term success.
