If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business. At 2% monthly churn, you are losing about 22% of your revenue every year. That is nearly a quarter of your revenue! It’s a clear indication that there is something wrong with the business. As the business gets bigger, this will become a major drag on growth.
We recommend that you work on fixing the problems that are causing this before you go on to worry about other parts of your business. Some of the possible causes of churn are:
- You are not meeting your customers expectations.
- The product may not provide enough value
- Instability or bugginess
- Your product is not sticky. It might provide some value in the first few months, and then once the customer has that value, they may feel they don’t need to keep paying. To make your product sticky, try making it a key part of their monthly workflow, and/or have them store data in your product that is highly valuable to them, where the value would be lost of they cancelled.
- You have not successfully got the customer’s users to adopt the product. Or they may not be using certain of the key sticky features in the product.
- Your sales force may have oversold the product, or sold it to a customer that is not well suited to get the benefits
- You may be selling to SMB’s where a lot of them go out of business. It isn’t enough that what you’re selling is sticky. Who you’re selling it to must also be sticky.
- You are not using a pricing scheme that helps drive expansion bookings
The best way to find out why customers are churning is to get on the phone with them and ask them. If churn is a significant part of your business, we recommend that the founders themselves make these calls. They need to hear first hand what the problem is, as this is so important for the success of the business. And they are likely to be the best people to design a fix for the problem.
More SaaS + Software Stats
More Growth Strategy Stats
Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable.
Between the SMB and Enterprise customer types, the top-quartile performers not only have net-revenue churn that is 14% to 23% percentage less than the average performers but also have net-revenue churn that is negative in an absolute sense
If your business if starving for new leads but struggling with all of the noise, rising costs, and a rapidly changing landscape of the digital marketing world, this seminar will equip you with what you need to gain momentum and leave with an actionable gameplan.