Churn rate is an important metric for every software-as-a-service (SaaS) company, as it reflects how many customers a business is losing. For smaller private SaaS companies, the average churn rate is 20%, according to recent industry reports. Let’s look at the significance of this statistic and discuss why it’s important for these companies to measure and track their customer churn at all times.
Churn rate measures the percentage of customers that terminate their subscription service in a given period of time. This metric helps companies calculate their customer retention rate, but also provides valuable insight into a company’s ability to generate repeat business and grow any type of recurring revenue stream.
For smaller, private SaaS companies with less than $10M in revenue, the median annual churn rate averages around 20%. This means that 20% of those customers will cancel their subscriptions in one year. While this may seem high at first glance, it’s important to note that higher churn rates are often indicative of fast growth – meaning more people are coming in than leaving out each day.
It’s also worth noting that smaller businesses typically have much lower churn rates than larger ones – largely due to the fact that they’re often more agile and can respond faster when something goes wrong or changes need to be made. That being said, even if a business has seemingly low churn rates overall, it’s still important for them to stay on top of customer satisfaction by tracking customer feedback regularly and proactively addressing any issues as soon as possible.
Rather than trying to reduce their overall customer churn numbers, smaller private SaaS companies should focus on increasing customer lifetime value whenever possible – either through offering special discounts or providing additional services or upgrades within the same product package. Additionally, these businesses should use data analysis tools like cohort analysis to better understand which types of customers contribute most towards long-term success and aim their efforts towards acquiring similar profiles moving forward.
By taking an active role in managing their customer experience and actively assessing customer health along the way, small private SaaS companies can reduce the chances of high attrition rates while optimizing potential revenue streams all at the same time – without having to worry about drastic changes in their median annual turnover rate year after year.