How to Assess, Prevent Churn

Nobody likes being abandoned, left out in the cold, and spurned for another. But when you’re in business, losing customers and revenues is sometimes just a fact of life.

However, businesses shouldn’t simply accept churn. Instead, they should analyze it, and figure out why it’s happening, to what extent it’s happening, and what they can do to prevent it from happening. And that all starts with churn benchmarking.

Understanding what’s normal in turns of individual and industry-wide churn, as well as churn for businesses with a similar focus and customer target, begins with looking within. First consider your own employee and revenue numbers. Also think about the employee numbers and revenues of your customers, and your average deal size and sales cycle with those customers. Add in the average length of contract. Consider whether your solution is sold based on time, seats, usage, or whatever.

Also figure in your sales model and the model others with whom you compare yourself are using. Also think about how many accounts you sell, have, and lost relative to your sales staff and your team at large. And then look at and compare your numbers with those of your closest competitors and your own internal customer retention goals and expectations.

All these metrics are important to get a better handle on what’s happening, why, and what is outside of the norm. For example, a company whose customers are mainly SMBs would likely have higher customer churn, because small and medium businesses tend to come and go more than larger entities. However, losing just one account with an enterprise can create a big hit for a supplier, as big businesses tend to spend more.

They say numbers never lie. But we all know that’s not true. In fact, many companies tend to measure and report churn to minimize the appearance of churn.  That might be an effective way for them to please their investors and leaders at that moment. But it’s not a great to learn and share what’s really happening and where a company needs to improve.

So, when benchmarking churn, cast a wide net. And think about some of the key metrics that may be tilting the balance.

Edited by Maurice Nagle