Churn

Churn is the bane of the lives of all SaaS startups. In simple terms it relates to those customers who fail to renew their subscriptions. The reasons vary greatly - however, ensuring everyone has a manic obsession with reducing churn rates needs to be an integral element for all SaaS businesses.

The following list of resources helps to shed some light on the drivers of churn, and how best to reduce it’s impact.

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How to Reduce Churn with a Customer-Focused Cancellation Flow

In this article, we look at how teams can approach cancellations as opportunities to re-engage and retain less-than-happy customers. This starts with optimizing the cancellation process so that customers only use it as a last resort action.

If someone has decided to leave I believe it is best to make it as easy as possible to do so. It is the same with newsletter unsubscribes. Anything other than a one click unsubscribe can be deeply frustrating. In this post Julia offers some suggestions as to minor process changes that are worth implementing ranging from reminding you as to what you’ll lose through to other options other than a straight cancel. She also suggests that it represents a good learning opportunity to try and understand the churn drivers. @alangleeson

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Is Your Churn Rate Within a Healthy Range?

This short post from Recurly outlines some churn rates for both B2B and B2C businesses.

Navigate down to the SaaS section to get some data relevant to SaaS businesses. Take all data with a ‘pinch of salt’ as comparing churn rates without further context is a dangerous game.

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The world’s largest study on churn 2

Last week we opened up with the world’s largest set of SaaS MRR churn benchmarks (part 1) to help founders and operators get over guessing when it comes to knowing if they’re on target or not in their businesses. Essentially, we answered the question, “how do you stack up with other companies?” You can see breakdowns of churn across ARPU, MRR, venture backing, and how long the company has been around here.

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SaaS Churn Rate - What is Acceptable?

As a consultant to SaaS and Cloud providers that are looking to grow, I get asked what an acceptable SaaS churn rate is all the time.

My starting point is that comparing churn rates across companies and industries is a futile exercise. There are too many unknowns to make a meaningful comparable. Nonetheless, Lincoln Murphy shares some valuable insights as to how to think about the concept.

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Unlocking the path to negative churn

As a SaaS company becomes larger, the size of the subscription base becomes large enough that any kind of churn against that base becomes a large number. That loss of revenue requires more and more bookings coming from new customers just to replace the churn.

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How to Reduce Churn by Building a Bulletproof Retention Process

Burbn was a foursquare knock-off. A location-based app that let you check-in to places, earn points for hanging out, and post pictures. It was too complicated and had a massive churn problem.

The developers started to use analytics to find out how users were using the app. They found that people didn’t bother using the check-in features at all. They only used the app to post pictures.

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Churn, retention, and reengaging customers

We’re on the receiving end of this confusion as Intercom is a product that actually reduces churn. People will read one of our case studies and ask us how to get similar results, but the first step is always to clarify what churn looks like in your business, and then make plans to address it.

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How a $11Bn SaaS company measures churn

As I prepared the S-1 analysis for ServiceNow, the third largest public SaaS company in the world, I came across a section in their latest annual report called Key Factors Affecting Our Performance in which the company describes the two ways they evaluate churn. One is common, but another is unusual. Below I’ve quoted their definitions.

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The three churn migration strategies of SaaS startups

Every SaaS business suffers from churn. If churn isn’t managed properly, the lost revenue from churned customers offsets new revenue and the business flat-lines or suffers negative revenue growth. I’ve seen startups employ three patterns for offsetting churn: acquiring new customers faster, upselling existing customers to buy more software, or structuring pricing to grow with customers.

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The maximum viable churn rate for a startup

An entrepreneur asked me the question, what is the maximum viable churn for a startup? Within that question, a few others are embedded. How should a founder think about trading off efforts to grow revenue and mitigate churn? What is the impact of account growth on net churn? Startups must walk a tight-rope to balance growth, churn and cash. Below is the framework I use for working through maximum viable churn. ​

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Why negative churn is such a powerful growth mechanism

Negative churn is an incredibly attractive characteristic of a SaaS company because it means that customer accounts are like high-yield savings accounts. Every month, more money comes in, without much effort. This is a powerful effect and can fuel SaaS companies to huge success, as we saw in New Relic’s S-1.

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Demystifying churn

s every SaaS entrepreneur knows, churn is one of the single most important metrics in determining the day to day health of the business. Acquiring new customers is time and capital intensive, and this growth is meaningless if those customers do not stay.

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What is churn?

A little over two years ago, I published a series of well received articles on SaaS metrics that culminated in the SaaS Metrics Guide to SaaS Financial Performance. Since then, I’ve received numerous inquiries regarding the many practical quirks encountered in day-to-day SaaS metrics implementation.

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The most insightful ways to analyse churn

Every business would like to know why their customers cancel, and every business wishes they could predict when customers are on the verge of cancelling. Then every business could be proactive in saving and satisfying their customers, right? Rather than reactively looking at their churn metric to see how much business went out the door.

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Which to prioritize - churn or growth?

Which is the more important priority? Growth or churn? Churn or growth? Early-stage companies have limited resources to focus their efforts. On one hand, growth is important in order to raise a venture capital round. Growth shows demand for a product. On the other hand, churn is a huge source of friction and raises questions of product market fit.

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