By Aaron Ross, Predictable Revenue
Do you retain 95% of your customers month-to-month? That sounds like something to be proud of—until you do the math. That’s 5% churn per month, or 60% per year. In other words, you have to replace 60% of your revenue every year just to break even. What if you have monthly 98% retention/2% churn? That’s still 25% a year, or a quarter of your revenue.
The best-run SaaS companies can see up to –2% churn per month (on a revenue basis). Yes, that’s negative 2%, which means they make more money every month. How? Because the customers who stay with them buy and spend more over time than what the company loses from other customers leaving.
If you’re a CEO, you need to take Customer Success as seriously as marketing, sales, or product development.