How To Increase Your Average Revenue Per User (6 Tips)

About this video

Dan Martell explains ARPU — average revenue per user — which he says he first heard from mentor Dharmesh Shah, co-founder of HubSpot, during a 2009 visit in San Francisco. 1) ARPU vs ARPA: ARPA is average revenue per account; he says for 97-98% of viewers they are effectively the same, though some accounts have multiple users or sub-accounts, and he will use ARPU. 2) Formula: monthly recurring revenue divided by the count of accounts. He suggests SMB ARPU should aim for $20 to $100 per month, notes annual contract value (ACV) equals monthly ARPU times 12, and gives broad SMB, mid-market and enterprise sizings. 3) Growth ceiling: growth is limited by three variables — new starts per month, ARPU, and logo/account churn — and calculators can map when new customers only replace churn, the churn flatline. 4) Grow ARPU via his Strategic P3 — product, packaging and pricing — plus upsells and cross-sells, add-ons such as premium support, and product bundles. He says founders on average tell him they last raised prices 3 to 5 years ago, with one client not changing price in 15 years. He offers his free Precision Scorecard Template to track metrics against targets.

Key takeaways

• ARPU = monthly recurring revenue divided by number of accounts
• ARPU and ARPA are effectively the same for most businesses
• SMB target given: $20 to $100 ARPU per month; ACV = ARPU x 12
• Growth ceiling is set by new starts, ARPU and churn
• Grow ARPU via Strategic P3, upsells, cross-sells, add-ons and bundles

Episode details: published November 30, 2020 · 9:40 long. Summary written by Self Growth Videos from the episode itself. Business results and any income figures mentioned are Dan Martell’s own claims, shared for education — they are not typical or guaranteed.

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