I have often said that churn (the rate at which customers cancel their subscriptions or otherwise stop buying from you) is the most important metric for a recurring revenue business. Why?
- The longer a customer stays, the more they are worth.
- The more they are worth, the more you can pay to acquire them.
- The more you can pay to acquire your customers, the faster you can grow.
- The faster you grow, the more capital you can raise to further accelerate everything. It’s a virtuous cycle.
The question I often get then is how much churn is too much? Continue reading How much churn is too much?
So far in the SaaS Math series, we have looked at why investors love SaaS, definitions of the key terms in SaaS math and last week we looked at user acquisition math. This week we’re talking about activation, retention and its polar opposite – churn. As you will see, churn and retention are the most important metrics to the long-term success of a SaaS business.
To recap, activation is just getting that 1st use of your product or service. Churn is the % of users / customers that abandon the service over time. This can be measured weekly, monthly, quarterly, etc. You will want to measure churn for users and churn for customers (assuming you have a free trial or freemium product). Retention is the inverse – the % of users that you keep.
Continue reading SaaS Math: Activation, Retention and Churn
Our company is in it’s 5th month of commercial operations now. With subscribers in 30 countries our daily volumes are going up steadily. Still, not all subscribers are created equal. Some are repeat, heavy users, others come check us out and move on.
When you sell over the web, there are no barriers, which is good and bad. Anyone can sign up, whether the service is really good for them or not. In these early days and months, it’s about building a massive user base. So, all subscribers are welcome. Still, while the go to market folks in our company sign up the masses, I am starting to build a profile of who our best classes of users are. Who are the Mobivox fanatics? Where are they? Why do they use our service so much? How do we find more like them?
Continue reading Customer quality: Go for it from day 1