07 Diligence

Seat usage renewal risk

How much recurring revenue will shrink at renewal because seats sit unused?

For investors and CFOs reviewing a seat-priced software business. Takes about three minutes.

The company's numbers

1The book

Currency

Recurring revenue on seat contracts

Industry

Share renewing in the next 12 months

2How the seats are used

Split the revenue by the share of paid seats each customer used in the last 7 days. The five shares are scaled to add up to 100%.

Customers using 80 to 100% of seats

Using 60 to 80%

Using 40 to 60%

Using 20 to 40%

Using under 20%

3What buyers do at renewal

Customers who cut seats down to what they use

The rest renew at the same seat count.

Spare seats they keep above what they use

Chance a customer under 20% cancels

Chance a customer at 20 to 40% cancels

Seats added by customers above 80%

4The rest of the year

Turns the renewal view into a full revenue bridge: gross and net revenue retention for the whole book, and ending recurring revenue.

Growth from customers not renewing this year

Upgrades or downgrades in the middle of a contract, as a share of their revenue.

New customers' recurring revenue this year

Won back from past customers

The answer

Net revenue retention on renewals

Recurring revenue at risk

Paid seats unused last week, per 100

One hundred paid seats, seated by how much they're used

The product

Used last week Paid for, not used Likely cut or cancelled at renewal Likely added at renewal

Renewing revenue, before and after

The whole book over the year

What to ask the company for

Take the result with you

A PDF report with your inputs, results, charts and method. Or the same as plain text for an email.

How this tool works

What it does

A customer on an annual contract counts as revenue all year, even if half its team has stopped logging in. The drop shows up only at renewal, when the buyer pays for fewer seats or leaves. This tool estimates that drop from how seats are used today.

Use it in diligence, or before a board meeting, to see how much of the recurring revenue is soft.

What you enter

The book. Recurring revenue on seat contracts, and how much of it renews in the next 12 months.
Usage bands. How that revenue splits by the share of paid seats used in the last 7 days.
Buyer behaviour. How many buyers cut seats to what they use, the spare seats they keep, the chance that low-usage customers cancel, and how much the heaviest users grow.
The rest of the year. Growth from customers not renewing this year, new customers and won-back revenue.

What you get

Net revenue retention on renewals: renewing revenue after cuts, cancellations and growth, divided by renewing revenue before.
The seat map. One hundred paid seats split by usage band. Hatched seats are likely to go at renewal.
The before-and-after bars for renewing revenue.
The whole-book bridge. Gross and net revenue retention for all contracts, plus new and won-back revenue, to ending recurring revenue.
A request list to send the company, and a PDF report for the investment memo.

The maths, assumptions and sources

Each band uses its midpoint: 90%, 70%, 50%, 30% and 10% of seats used. A customer that cuts seats keeps used seats plus the spare share, up to its current count. Customers above 80% add the growth share instead. Cancellation chances apply to the two lowest bands. Revenue retained = renewing revenue × (1 − cancel chance) × seats kept. The model assumes price per seat stays the same at renewal.

Zylo, 2026 SaaS Management Index: the average organisation uses 54% of the software licences it pays for. Buyers now track this and cut unused licences at renewal.