Getting your arms around Churn
By Ellie Wu
What type of churn should you track? How? Then what?
Thanks to Ari Klein and Nick Mehta for sharing Ajay Agarwal & Ben Vonwiller's TechCrunch article on the affect gross churn can have on SaaS growth. So, this week's post will have a nod to Halloween and the spookiness of churn.
According to the post, McKinsey's database of pre-IPO SaaS companies find gross churn (how effectively companies keep existing customers) is the most impactful metric.
How is gross churn different from net churn?
Gross Churn: the stability of current revenue from existing customers.
Net Churn: combination of gross churn + expansion revenue (up-sell/cross-sell)
It's also important to note that in high growth environment, revenue matters and gross churn takes priority over logo churn.
" Losing any kind of customer will feel painful, but as a SaaS CEO, you have to be okay with some set of your “off spec” customers churning while you double down on your most important “sweet spot” customers."
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