How you can decrease your monthly churn

It costs you between five to 25 times more to acquire a new customer than to keep an existing one. On top of that, reducing churn by 5% can increase profits by more than 25%. When you’re pushing to succeed, these are the kind of ratios you want working for you.

Churn is the opposite of a vanity metric - a metric that looks good, like your number of social media followers, but has little correlation to business results. Keeping churn low should be one of your key concerns if you want to create a successful SaaS company..

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So what is your churn rate?

Churn rate refers to the rate at which customers are leaving, canceling, or unsubscribing from your SaaS offering. It's a key metric for understanding how well your SaaS is performing as a whole. If your churn rate is high, you must find out why and address the issues with urgency!

There are three ways of calculating churn rate: customer churn, revenue churn, and net churn. We’ll examine each of them shortly. First, let’s look at churn relates to time.

Choosing your timeframe

When you calculate any churn metric it’s important to pick the most relevant time period. The time period you use to calculate your churn will typically fall in line with your subscription model (monthly or annual). Monthly subscriptions suggest choosing monthly churn rates and yearly subscriptions suggest yearly churn rates.

How to effectively reduce your churn rate

SaaS software churn is unavoidable unless you’re first to market and chances are you’ll have competitors chomping at the bit to steal your customers away.

Unavoidable doesn’t mean you can’t take steps to reduce your churn. It’s easy to write off churn as something you can’t control but that simply isn’t true. Here are some ways you can avoid unnecessary exits from your SaaS plans.

Companies going out of business or no longer being able to pay for their plan

You can’t control how successful your customers are, but you can control who your customers are.

If your software churn rate increases due to your customers’ businesses failing you need to look at your acquisition strategy. Look at how you qualify your leads and set some simple requirements that indicate success in a business.

This could be as simple as being in operation for over two years or a brief look at last year's filed accounts to ensure the business is profitable.

Attractive opening deals that hide true costs

Introductory offers are a powerful tool you can use to market your SaaS to new audiences. These typically consist of massive savings of 50% or more and give you a warm fuzzy feeling because you’ve just saved yourself a fortune.

When it comes to renewing at the end of the introductory offer exactly the same feeling occurs, but it’s the complete opposite. You’ve had a tool for 6 months but now you have to pay double for the next six!

I’m not going to tell you not to run introductory offers because let's be honest here, they work incredibly well. Solving this problem requires action from your end in the form of a personal email, phone call, or drip campaign BEFORE your customer renews.

This gives you or your sales team an opportunity to discuss the previous period of use, gauge customer feedback and act accordingly. This could be continuing the discount for another period or offering a discount on a plan upgrade to help with your net churn rate.