Customer Churn. Everyone loves talking about how to calculate it, how to reduce it, and how bad it is (us included!). But isn’t it time to sit down and figure out how we can actually influence it, and what actions we can actually take, given certain characteristics? The Actionable SaaS Metrics series goes beyond measuring and calculating. It takes a deeper look at some characteristics of common subscription metrics, with the goal of identifying key actionable steps to optimize them for your business.

1. What to do if your
Churn Rate is…
CHURN RATE
?
ACTIONABLE SAAS METRICS

2. Customer Churn
Everyone loves talking about how to calculate it,
how to reduce it, and how bad it is (us
included!).
But isn’t it time to sit down and figure out how
we can actually influence it, and what actions we
can actually take, given certain characteristics?

3. How to measure Customer Churn Rate
1. The“basic”formula
Customer
Churn Rate
Number of customers who churned in period
Total number of customers at start of period
=

4. *source: https://www.shopify.com/technology/4018382-defining-
churn-rate-no-really-this-actually-requires-an-entire-blog-post
How to measure Customer Churn Rate
2. The“iterative”formula (suggested by Shopify*)
Customer
Churn Rate
=
1 - Active customers at end of day
Active customers at end of day
SUM ( )
Learn more in The Ultimate Churn Rate Cheat Sheet:
https://blog.chartmogul.com/2015/02/the-ultimate-saas-
churn-rate-cheat-sheet/

5. What to do if your
Customer Churn Rate is…

6. 1. LOW
!

7. Well, you’re sitting in a pretty good position that
a lot of businesses would be envious of - Well
done you.
But just before you pop the champagne and log
off for the day, we should be sure that the
numbers you’re looking at actually make sense…

8. What is“low”churn rate?
Many SaaS companies at growth stage report
monthly churn rate of around 2-5%.
Remember that this level of monthly churn rate
still equates to losing a significant amount of
your customer base in the longer term (half of an
entire cohort over the period of a year!)

9. Actions to take
• Make sure you’re measuring Customer
Churn correctly (see previous slides)
• Continue to invest in customer success and
lowering churn – what you see may just be a
temporary characteristic of your business at
this point – i.e. maybe nobody has reached the
“critical”churn risk period yet.
• Pat yourself on the back. You’re doing okay so
far!

10. ChartMogul breaks down your MRR to give you
deeper insights - simply connect your billing platform.
Get your free trial: ChartMogul.com

11. 2. HIGH
"

12. High Churn Rate is the Achilles’Heel of any growing
business. Tomasz Tunguz (Redpoint Ventures)
illustrates this perfectly:
source: http://tomtunguz.com/negative-churn/

13. What is“high”churn rate?
Anything over 3-5% should be sending warning
signals.
Some businesses by design are more tolerant of
higher churn levels – i.e. B2C businesses (a large
number of customers paying a tiny amount will
always exhibit a higher customer churn rate.)

14. Actions to take
• Segment your churn into Cohorts – look at a
Cohort Analysis. You can use a platform such as
ChartMogul for this.
• Find out why customers are churning,
particularly in those high-churn months you
just identified. Talk to them! (Or set up a
survey)
• Implement a framework for customer success
in your business, aimed at helping customers
achieve their goals within your product.

15. If you have a high churn rate, use Cohort Analysis to
identify when customers are churning:
Get your free trial: ChartMogul.com

16. 3. UNSTABLE
😕

17. Unstable Customer Churn Rate
(jumping around from one month to the next) is
actually quite a common symptom, particularly in
smaller SaaS startups with just a few customers.

18. *https://blog.chartmogul.com/2015/02/the-ultimate-saas-churn-rate-cheat-sheet/
Actions to take
• Make sure that you’re calculating Customer Churn Rate
correctly and consistently. Check The Ultimate Churn
Cheat Sheet* for more detailed examples.
• If your number of customers is fairly small (less than 100
customers), consider removing focus from the Customer
Churn Rate metric – an unstable number will not help
you make consistent, positive decisions about your
business.
• Focus on talking to your customer base
to understand their experience and needs from your
product.

19. We’ve got your back! More great resources, guides &
cheat sheets at blog.chartmogul.com
Get your free trial: ChartMogul.com