Connect with us

SaaS

If Nothing Else – Segment Churn

Avatar

Published

on

A curious thing happened on the way to SaaS in 2021+.  Everyone seemingly became an expert in churn.

Your churn rate should be 0.123909% per month.  It should be net negative.  You need to retain 118% of your revenue.  Etcetera, etcetera.  You will get a lot of advice here.

Most of these insights are directionally accurate, but here’s the thing.  Churn is not a GAAP metric.  It doesn’t have a universal definition.  In fact, Christoph Janz had a great post a ways back noting how even public companies define churn differently.  And even hide it in part, by doing so.  Read it here:

I learned this myself starting out as a SaaS CEO.  I compared us to the only public company in our space, back in the day, and noted a curious thing.  This public company did break out churn in their public documents (not every company does).  But they excluded churn in the first 60 days.  Why?  Their answer: because it was a trial period, and they felt churn there did not represent long-turn churn risk.  But also, part of the answer I am sure is that churn was much higher in the first 60 days. 🙂

In any event, what I learned from that was to segment churn.  I quickly segmented our churn into three segments:

  • Single-seat and deals < $99/month.  We had about 3% a month churn here measured by revenue.  They turned over fairly quickly, as credit cards expired, jobs changed, etc.  Even today, I see many “solopreneur” businesses churning at about 3% a month.  Single person businesses.  They just … go under.  A lot more often than Fortune 500 companies do, that’s for sure.
  • $99-$999/month deals.  These “credit” card deals had about 100% net revenue retention, for us, after churn.  Turns out, this is pretty similar to Hubspot, for example.  And Zendesk.  And so many others in this zone.
  • $10k-$100k+ and up deals.  These deals had about 120% net revenue retention.   Turns out, this is a lot like other B2B SaaS companies that sell to the enterprise.  See Box’s bigger customers, Salesforce, etc.

As time went on, we expanded the size of each category (our “Big” Deals went from $12k a year to $120k a year and beyond).  But the segmentation, and metrics, were roughly similar.

Churn should be naturally higher in smaller business segments than larger ones.  If you don’t segment it — no one will see that.   Also, if you don’t segment churn, it will likely look higher with bigger customers than it really is.  And you will be trying to attack different churn problems with the same answers.  Keeping big customers happy really is different than keeping small businesses from seeking a cheaper tool.

And just see where the money goes.  Even if churn is higher than you’d like based on certain metrics, if at the end of the day, you retain a lot of the money, that’s maybe fine.

And if you want to exclude trials and POCs from churn, that’s OK too.  Just don’t call them recurring revenue if you exclude it.  Segment them out as a POC/trial revenue, and don’t count the deals as part of your core MRR/ARR until the trial/POC ends and converts.  Churn is often much lower if you segment POCs and trials from post-trial revenue.

Whatever you do, and however you do it, segment churn and track the money. 

And also segment NPS and CSAT as well per segment. NPS and CSAT also often vary widely by segment.  Double down on the happiest segments, usually.  And the segments growing the fastest.

You will see new things, and new patterns.  

And maybe — it’s not as bad as you think.  Or at least different than you think.  Blended churn metrics only confuse things.  Big companies will stay for years if you provide them a true solution.  But individual and small customers … well … even if they are very happy, they will come and go.

(note: an updated SaaStr Classic post)

Published on April 26, 2021

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.saastr.com/nothing-else-segment-churn/

SaaS

Avatar

Published

on

Continue Reading

SaaS

Avatar

Published

on

Continue Reading

SaaS

Avatar

Published

on

Continue Reading

SaaS

Avatar

Published

on

Continue Reading
Aviation4 days ago

American Airlines Passenger Arrested After Alleged Crew Attack

Blockchain3 days ago

The Reason for Ethereum’s Recent Rally to ATH According to Changpeng Zhao

Blockchain2 days ago

Chiliz Price Prediction 2021-2025: $1.76 By the End of 2025

Blockchain3 days ago

Mining Bitcoin: How to Mine Bitcoin

Blockchain3 days ago

Mining Bitcoin: How to Mine Bitcoin

Fintech4 days ago

Talking Fintech: Customer Experience and the Productivity Revolution

Blockchain5 days ago

Bitcoin Gains Bullish Momentum, Signals Another Major Rally

PR Newswire2 days ago

Teamsters Lead Historic Defeat of CEO Pay at Marathon Petroleum

Blockchain5 days ago

Ethereum Market Capital Overtakes Bank of America

Aviation5 days ago

Lufthansa To Equip Entire Boeing 777F Fleet With Sharkskin Technology

Blockchain3 days ago

Mining Bitcoin: How to Mine Bitcoin

Startups5 days ago

Equity Monday: TechCrunch goes Yahoo while welding robots raise $56M

Cyber Security4 days ago

Alaska Court System Temporarily Disconnected the Internet After a Cybersecurity Threat

AR/VR1 day ago

Apple is giving a laser company that builds some of its AR tech $410 million

Blockchain5 days ago

Ripple Releases $1.6 Billion XRP from Escrow Account

Startups5 days ago

Top-5 Working Marketing Strategies on 2021 for Moving Company

Crowdfunding5 days ago

Cryptocurrency ATM Network Bitcoin Depot Launches More Than 350 New ATMs Across the U.S.

Esports3 days ago

TFT 11.9 B-patch nerfs Mordekaiser and LeBlanc

Blockchain3 days ago

Amid XRP lawsuit, Ripple appoints former US Treasurer to its board, and names new CFO

Cyber Security4 days ago

Incident Detection and Response Basics Greatly Matter

Trending