Churn is the silent killer for Software-as-a-Service startups. SaaS is such a great business model that people focus on the cash flow predictability of recurring revenue, high gross margins, and overall growth prospects. Churn, or losing customers, isn’t talked about as frequently and is just as important to understanding the model as more popular items like cost of customer acquisition and cost of goods sold.
Churn, globally, is a valuable metric that should be tracked closely. Even more important than generic churn is looking at churn on a quarterly or monthly basis, to get a better understanding of each cohort of customers for trend analysis. Here are some other churn cohorts, like monthly cohort analysis, to consider:
- By customer company size (e.g. revenue, number of employees, etc)
- By customer annual contract value size (e.g. track the five most common dollar amount ranges paid for the service)
- By customer acquisition source (e.g. channel sale, Google AdWords, cold call, etc)
As you can tell, there’s no shortage of potential churn cohorts to analyze. The key is making it easy to track and run churn cohort reports against a variety of factors.
What else? What are some other churn cohorts to consider for SaaS startups?
David Cummings on Startups 