How to measure your SaaS churn rate and optimise your growth3 min readReading Time: 2 minutes
SaaS (Software as a Service) providers are always looking for new ways to grow their businesses. One of the key metrics they focus on is churn rate – the percentage of customers who cancel their subscription each month.
There are a few different ways to measure your churn rate, and the most effective way to reduce it is to constantly experiment and track the results. This article will show you how to measure your churn rate and some tips on optimising your business growth.
How to measure your SaaS churn rate
To calculate churn rate, simply divide the number of customers who cancel their service in a given period by the total number of customers at the beginning of that time period.
The formula for calculating your SaaS churn rate is as follows:
(Number of Cancelled Customers) / (At the Beginning of Period)) = Churn Rate
For example, if you had 100 customers at the start of the month and 10 of them cancelled their subscription by the end of the month, your churn rate would be 10%.
This metric is essential for companies to track as it can be an indicator of customer satisfaction. A low churn rate means that customers are satisfied with the product or service and are unlikely to stop using it. On the other hand, a high churn rate indicates that customers are not happy with the product or service and are likely to stop using it.
What is a reasonable churn rate for SaaS?
There is no magic number for what constitutes a good churn rate, as it will vary depending on the industry and the specific product or service. However, a good churn rate is one that falls within the 5-10% range annually. This means out of 100 customers, 5-10 will leave each year. This rate indicates that a company can retain most of its customers and is not bleeding them out at an alarming rate.
How to optimise your SaaS growth
You can do a few key things to optimise your SaaS company growth. First, focus on acquiring high-quality customers that are likely to stick around. Creating a pricing strategy that maximises your revenue while keeping your customers happy is also important. Additionally, ensure you’re constantly measuring and analysing your customer acquisition and retention rates to identify areas for improvement. Finally, keep your overhead low and your team lean so you can scale quickly and efficiently. By doing these things, you will be well on your way to achieving sustainable growth for your SaaS business.
It isn’t that difficult to calculate your SaaS churn rate – and it will provide several insights into how you can optimise your growth. You might even learn something about the psychology of your users, which could prove to be invaluable information for developing new features and expanding your customer base. Ultimately, with all this information, you’ll have a better idea of where to focus your efforts for future growth.
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