Balancing SaaS Growth: New Customer Acquisition vs. Upselling

SaaS founders often focus heavily on metrics like rapid growth and strong net revenue retention. But not all growth is equal—or equally valued—and there are multiple paths to achieving it.

Businesses generally grow in three primary ways:

• Acquiring new customers
• Expanding revenue from the existing customer base through cross-selling, upselling, or packaging strategies
• Raising prices for current and new customers

Pros and Cons of New Customer Acquisition

Acquiring new customers can resemble a land grab. The company that captures the majority of customers within its ideal customer profile (ICP) gains a competitive edge, often leading to a flywheel effect. This can include network benefits such as referrals at conferences or word-of-mouth endorsements. However, this strategy is costly and time-consuming due to high customer acquisition costs (CAC). The length of sales cycles and substantial marketing spend can make this even more challenging—especially for founders less experienced in sales and marketing.

For bootstrapped companies with a single product and limited upsell options, acquiring new customers may be the only viable growth path. That said, these businesses should explore whether cross-selling becomes feasible over time, such as by launching complementary modules or services.

Advantages of Upselling and Cross-Selling

Upselling can begin with something as simple as a new feature or product. Companies can use insights from existing customers to guide product development and create upsell opportunities. In the early stages, upselling may fall to support or sales teams, but success depends heavily on having the right personality—someone who bridges the gap between support and sales. Founders must think early about pricing and packaging to support future product evolution. A flat, all-you-can-eat pricing model may restrict upselling potential down the line. Since R&D is expensive, businesses need to be selective with new product development.

Deepening relationships with existing customers through upselling helps make the vendor harder to replace and strengthens customer loyalty. Successful companies achieve this by evolving their products, adopting modular designs, and crafting flexible pricing strategies. They also ensure they have the right sales personas engaging the customer base to drive expansion.

Upselling usually comes with a lower CAC since the customer is already onboard and under contract. When a vendor proves value early, customers are more likely to explore additional offerings. But upselling has its limits—customers will only spend so much with one vendor. The upsell potential is tied to whether the company is a point solution or a platform. Platforms offer more room for expansion, while point solutions may need to either replace or integrate into existing systems—each with its own challenges. Although upselling often involves shorter sales cycles and lower costs than new acquisition, there’s a ceiling to how much revenue can be extracted from existing customers.

The Impact of Price Increases

Founders often underprice their offerings and are hesitant to raise prices. Yet nearly all acquirers implement price increases post-acquisition—and this approach is usually effective.

There are three common strategies for raising prices:

• No increases at all
• Infrequent, large increases (e.g., 30% every eight years)
• Regular, small increases (e.g., 2–3% annually, aligned with inflation)

One prevalent approach may be to avoid price hikes altogether, which is risky—especially given inflation and market trends. Founders should find a middle ground between dramatic one-off increases and steady incremental changes.

Doubling prices overnight might sound appealing, but it rarely works long-term. It raises questions about whether the company’s value lies in pricing or in product features. Even when a business wins on functionality, steep discounts suggest that price is still a major driver—particularly for small and medium-sized businesses.

Underestimating the contribution of pricing to overall growth—typically pegged at 7–10%—can mask its importance in driving net revenue retention (NRR). Modest, consistent increases offer operational leverage, freeing up resources for acquisition and upsell efforts. While a one-time 30% increase can create a short-term spike in metrics, savvy buyers know it's not sustainable. On the other hand, consistent annual increases of 2–3%, resulting in 125% NRR, are seen as healthier and more predictable. Sudden increases right before an acquisition often raise red flags for buyers, who may adjust their growth projections accordingly.

Balancing New Customer Acquisition and Upselling

Creating a pricing model that supports upselling is essential—especially in the early stages, when bandwidth is limited. If a company isn’t seeing natural expansion in its existing accounts despite upsell efforts, this could be a red flag, particularly if marketing and sales resources are constrained. Tiered pricing, modular product designs, and usage- or payment-based pricing can facilitate this kind of expansion. While these models may not be purely SaaS, they are increasingly embraced as sustainable growth strategies.

Many founders incentivize salespeople to handle both acquisition and upselling, but aligning commission structures for both can be tricky. Acquisition tends to be harder—and more heavily rewarded. Separating these roles often leads to better outcomes. A strong structure might include:

• A support team focused on onboarding and customer comfort
• A success team tasked with driving engagement and identifying expansion opportunities
• A sales team dedicated to bringing in new business

Equally important is establishing a feedback loop between customer-facing teams and engineering. While engineers love building new features, they may lack firsthand insight into customer pain points. Ensuring feedback from the field reaches the product team helps guide development toward features that naturally support upselling.

When designing new products for upselling, founders should avoid creating features just for the sake of it. It’s advised to go to the source and tap into insights directly from current customers to develop tools that solve real problems. This may not only help improve adoption rates but could also reduce risks inherent in new product launches.

How Buyers Diligence Growth Strategies

Buyers scrutinize key performance indicators (KPIs) during due diligence. These metrics reflect how a company has invested across departments and chosen to grow. While no founder wants their business to be reduced to a spreadsheet, KPIs offer a clear snapshot of performance.

Metrics such as gross/net/logo retention, CAC, LTV, and payback period tell a story. For example, focusing heavily on acquisition without a strong ICP framework can lead to overselling and early churn—hurting retention metrics and hampering future upsell potential. Poor fit customers may also distort feedback loops, making it harder to build effective cross-sell and upsell strategies.

A high CAC can fill the top of the funnel but may also create a leaky bucket if the acquired customers churn quickly. This not only drags down the LTV:CAC ratio but also dampens growth and valuation. Relying solely on one growth lever—like acquisition—makes it harder to sustain momentum as the company scales.

Improving valuation often comes down to strategic reallocation. Even a small shift—say, 5% of acquisition budget redirected to customer success—can aid in boosting NRR from 100 to 105, with meaningful impact. Founders are often surprised to learn that a small portion of their customer base (often the worst-fit customers) causes a disproportionate share of churn and support strain. Cleaning up this segment improves margins and metrics.

Ultimately, buyers want to invest in companies with strong fundamentals across all growth channels—not just those excelling in one area. Private equity firms, for example, tend to prioritize improvements in pricing, packaging, and go-to-market strategy over new product development. Founders seeking PE investment should showcase strength in these areas. Strategic buyers may already have the product but look for signals of upsell potential to drive growth post-acquisition.

The Case for a Balanced, Multi-Faceted Growth Strategy

A well-rounded approach to growth is essential for SaaS success. By thoughtfully balancing price increases, upselling, and new customer acquisition, founders can better work toward creating sustainable, high-performing companies that may be more attractive to investors and buyers alike.

These efforts not only help drive performance but may also increase valuation. Taking a deeper look at how predictable revenue impacts SaaS valuations can help you understand how smart growth strategies translate into enterprise value.