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8 responses to “Can We Ignore Churn Early On at a SaaS Company?”

  1. Joel York

    I’m going to go with Bob on this one (sorry Jason). You should worry about churn UNTIL you have achieved your lowest possible “natural churn rate” that Jason mentions.

    Beyond the customer issues Bob rightly points out, the financial impact of churn is devastating.

    1) Churn limits growth, period. The biggest revenue run rate you can ever have is your booking rate divided by your churn rate. Lower churn, bigger recurring revenue, bigger valuation.
    (http://chaotic-flow.com/saas-metrics-saas-churn-kills-saas-growth/)
    (http://chaotic-flow.com/saas-customer-lifetime-value-cltv-drives-saas-company-value/)

    2) Upsells are not negative churn. Upsells are growth. Churn eats them.

    3) The financial version of making the best product for your customers is “achieving your natural churn rate” Until you have achieved it, you need to make your product even stickier. Why not? The financial returns are gigantic.

    4) And, here is where it gets controversial for VCs vs. Founders. Churn eats cash and delays profitability…in a BIG way. VCs are often 100% focused on growth and happy to give founders more cash, because it increases their percentage. Founders want to avoid dilution and raise as little capital as possible.
    (http://chaotic-flow.com/saas-profitability-saas-company-is-as-saas-customer-does/)

    My 2 cents.

    JY

  2. Bob Warfield

    Zoli, always love your pix when I fail to add one!

  3. mrryanconnors

    You can ignore churn if you don’t mind profits.

  4. Apptegic (@apptegic)

    This post is a great compliment to Why Churn is Critical in SaaS. http://www.forentrepreneurs.com/why-churn-is-critical-in-saas/ You have to take care of your customers and then they’ll take care of you.

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