Law of Large Numbers
This is a well-known probability or statistic theorem. For we lay people, the theorem is best explained and used to describe what happens when you roll a pair of dice a large number of times. You can read about the law of large numbers anywhere on the web and bring back that horrible “completely lost feeling” you had in your high school stats class.
Or, you can think of it in context of churn or renewal rate in a SaaS business. In simple terms, if you have enough clients and transactions, the use of a single churn or single renewal rate might be statistically accurate enough to use for the projection of renewal bookings as well as for revenue projections.
How many is enough? It’s impossible to generalize and answer this question. The more heterogeneous your contracts, packaging, client behavior, the more transactions you need. But, even a SaaS company with a simple packaging model and consistent client profile might need a lot more transactions than it has to be able to use a single number safely.
The only way to know how many transactions you need is to hire a statistician. Of course, you can play it safe and project bookings and revenues using different renewal rates for different customer and contract segments (Lifecycle Renewal Rates).