Before SaaS (the Age of Sales), revenue was all about the initial deal. Big contracts, one-and-done. Then came SaaS, with three key phases:

Initial Sale

Retention

Expansion

Phase 1: Initial Sale

It still matters. Whether it’s a simple self-serve upgrade or an annual contract, closing the first deal kicks things off. Strong initial sales help you raise funds and build credibility. But today, that first sale often brings in far less revenue than it used to.

Phase 2: Retention Revenue

“You have to keep them happy—forever?” Yes. Retention is where the biggest opportunity lies. Consider this:

Initial sale: $500

× 12 months = $6 000

× 24 months = $12 000

× 36 months = $24 000

Retention revenue can easily dwarf your initial sale. Nail this phase, and you’ll build a sustainable SaaS business.

Phase 3: Expansion Revenue

Often overlooked, but vital. Upsells, cross-sells and add-ons drive this phase. Expansion revenue fuels what we call Net Negative Churn.

What’s Net Negative Churn?

Net Churn = Churned Revenue − Expansion Revenue.

If expansion exceeds churn, you get a negative number—that’s good. Even if you stop signing new deals, your revenue still grows.

Want SaaS Success? Make Organisational Shifts

Understanding the three phases is half the battle. The rest is execution. You’ll need to rethink adoption, support, sales and marketing.

Focus for Your Sales Team

Your sales team must do more than close deals. They need to support trial and freemium users, guiding them toward activation.

The Rise of Customer Success

Reactive support isn’t enough. Build a proactive Customer Success function to drive onboarding, training and long-term retention.

Enter the Chief Revenue Officer

Silos between sales and success create gaps. A CRO bridges those functions, owning strategies and growth across all three revenue phases.

Product Engagement: Key to Mastering the Three Phases

Product engagement data tells you who’s using your solution, how they use it and where they get value. With these insights, you can prioritise where your teams focus:

Engagement in the Initial Sales Phase

In a trial or freemium world, prospects often have hands-on time before talking to sales. Track activation and feature use to focus your efforts on the right leads.

Engagement in the Retention Phase

Some accounts pay but don’t use the product. Your CS team needs to monitor:

Onboarding progress

Adoption rates for key features

Drops in engagement at account and user levels

No guessing—just clear signals for action.

Engagement in the Expansion Phase

Unengaged customers won’t expand. Use engagement as your leading indicator. If a feature is popular, it’s a cue to upsell. If usage drops, it’s time for intervention.

Build a Winning SaaS Revenue Operation

To win at SaaS revenue, you must accept three truths:

SaaS revenue goes well beyond the first sale. You need to master Initial, Retention and Expansion phases.

A management structure that spans all three phases gives you the best chance of success.

Product engagement data is the key to smart, scalable revenue operations.