As marketers we’re taught to avoid churn. The more enlightened ones among us understand that reducing churn = growth.
Now try this one on for size: use your churn rate to set your growth goals.
Suppose you have 1,000 subscribers paying $20 per month for your SaaS platform. Your top-line is $20,000 MRR, but you have 12% churn.
This means if you acquire zero new users for a full month, you would only have 880 subscribers next month, and your MRR would drop to $17,600.
OK, now check this out.
If churn is 12%, you could merely double it and set that as your baseline growth goal.
Suddenly, you have 3 cases by which to measure the health of your business:
- Worst case — zero new customers, 12% churn, $20k –> $17.6k MRR
- Base case — 12% churn + 12% growth, $20k –> $20k
- Growth case — 12% churn + 24% growth, $20k –> $22.4k
In the growth case, you’ve grown 12% in a single month. Maintain this focus on 2x churn for a year, and you’ll grow to at least $87,000 MRR. Huge.
Of course, this does not account for the natural reform that occurs when churn is as high as 12%.
Businesses with empathy are likely to uncover new features, support gaps, pricing, or customer persona issues that enable them to reduce churn from 12%, while still maintaining a growth of 2x their worst case.
Next time VCs or peers claim you need to be growing by an arbitrary metric, consider this strategy instead. Plans rooted in reality are good plans indeed.