SaaS customers cancel their recurring revenue subscriptions. It’s natural that they come and go. But how often is it happening - and how is your churn rate affecting revenue?
Dealing with churn and why it’s critical to understand
Churn rate is a critical metric for all SaaS businesses. This figure is vital for representing the probability of customers that may drop out.
Dealing with churn is another critical step that requires identifying the leading causes of why customers terminate subscriptions with your company. While some factors may be in your control, others will have external elements attributed to the reason.
How to monitor/calculate your churn rate
Looking closer at the churn rate will give you an indicator of the main reasoning behind consumer behaviours. While no metric will provide you with the full story, there are some vital figures to consider when identifying where improvements are needed.
Churn by number of customers
On a base level, pinpointing the number of customers that churned in a period will enable you to track trends over time.
Churn by revenue
Tracking churn by revenue in the period will offer you an insight into the impact it had on this figure. This allows you to make adjustments in forecasting and long-term planning.
Churn by number of licenses
On a deeper level, looking at the type of users or licenses lost in a particular period will help you track trends and forecast future losses. This metric could help your business take action before the customer has cancelled.
Churn by-product downgrades
Customers downgrading subscriptions will slow your business growth. Identifying this figure in a period can highlight this metric and establish a forecast for future lower product usage or downgrading of subscriptions.
By monitoring each of these metrics, your organisation will have an understanding of customer behaviour and how they use your products. By using churn on a granular level, these figures create more visibility in marketing and sales funnels to ensure you drive traction in the right areas. Understanding the churn rate and the elements that influence it will give you a better overview of your customers and business trajectory.
Advice for working towards negative churn
Negative churn is an aspiration for all SaaS companies. However, it takes time. Low churn rate is manageable for many companies if metrics are identified and analysed to ensure customer retention. Churn rates vary depending on the industry, and while churn is not ideal for any business, it is not unusual. The main focus on achieving negative churn is to optimise your product and the customer experience. However, to realise this, delving deeper into your customer behaviour will ensure this rate remains low.
How to track churn rate for SaaS with Billforward
SaaS billing platforms are an innovative and streamlined way to improve the customer experience. With this type of service, automated billing and the impressive real-time data via ChartMogul on the Billforward platform enables each stakeholder the opportunity to view tools and intelligence about each funnel.
Monitoring your churn rate is easy with Billforward’s custom Business Intelligence Tool. Here your team can understand churn and the metrics discussed above. Plus, analysis such as LTV, revenue reporting and user data can be accessed to plan performance and implement improvements to the sales and marketing funnel. Reports can also be accessed in comprehensible formats for all types of users and business needs.
Churn rate is a useful metric for identifying strengths and weaknesses in your customer offering. Understanding how the numbers can lower the churn rate will positively impact your business and enable future growth. This metric is not a constant, and it is vital to monitor and track trends and changes as your business matures.