Good churn, bad churn

Published on Sep 25, 2020 in Business

As a SaaS founder, it's easy to look at your churn rate and make assumptions about the state of your business.

In reality, not all churn is created equal.

Customers churn for an almost endless variety of reasons but ultimately all churn falls into two categories: inevitable churn and preventable churn.

Learning to differentiate between these two types of churn is one of the best skills you can have as a SaaS founder.

Inevitable churn is due to unforeseen and unpreventable circumstances, like a complete change of strategy that doesn’t require your product anymore or your customer’s company going out of business.

Preventable churn comes from people you could (and indeed should) have retained. These are people who have stopped getting value from your product or found a better alternative.

No single metric tells you the whole story about your business but churn rate is especially misleading because that number is likely inflated by customers you should not be worried about anyway. As a SaaS founder, especially if early stage, you can't afford to spend time on unimportant things.

Inevitable churn is just a distraction. And more importantly, not actionable. How does knowing that someone has churned because their company closed down help you?

Instead, by analysing preventable churn you get insights about how people use (or don’t use) your product, your pricing, your onboarding, the value they get over time and much more.

Spend more time investigating your churn and only focus on preventable churn.

You will not just create a better product; when you focus on what really matters and ignore the noise, your mental health will thank you too.

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