Keep Customer Churn Rate Under Control

April 23, 2012

If you are a SaaS company, you surely watch customer churn rate like a hawk.  When your company is working hard to add new customers, and then losing a good portion of them every year, that’s a bad thing.  It says a few things about your business:

  1. You may not have as good customer relationship management as you could to support your growth so that customers actively engage with your products
  2. There may be problems with your product that you need to fix or
  3. Your pricing and/or packaging may not be optimal for your market and the growth of your business.

One or more of these issues could be impacting your churn rate.

How to Calculate Customer Churn Rate

There isn't one easy answer for how to calculate customer churn rate. The reason is it depends on where you are in your sales cycle and where you are in your business. The easiest way to figure out the customer churn rate is to  take the customers you lose during a specific time frame and divide that by the total number of customers you had at the beginning of that specific timeframe.

It's important to remember that there are lots of metrics that can be measured using customer churn rate, and it is easy to fall down the rabbit hole of churn. To avoid that, stick to those benchmarks you know you need to keep to continue to grow your business, as well as the reason why the churn rate is happening. The goal is to get to the bottom of why your company is losing customers and how to prevent that and have that benchmark continue to rise.