Achieving a 0% churn rate in your MRR business is the dream, but in all cases, it’s not reality. There are steps any MRR business can take to gradually reduce their churn rate. Let’s look at why you should accept MRR business churn and steps you can take right now to begin reducing your churn.
What is MRR churn and why should you care?
Take the churn MRR from last month and divide that by last month’s MRR = churn rate. This is a simple way of measuring your churn rate, especially to start off.
When calculating churn rate, it’s most common to also add in the MRR that last months downgrades adds up to.
When looking at company churn, some choose to aim for a 0% churn rate – perhaps they just don’t want to accept that churn is part of their business and so they fight to eradicate it completely or they’re ignoring MRR churn and guessing their numbers (not uncommon when first starting out in a care plan business).
The first sentence of this post includes a sentence that reads “Achieving a 0% churn rate in your MRR business is the dream, but in all cases, it’s not reality”. OK, in very, very, very few cases, is it a reality, but it’s slightly possible. Even multi-billion dollar companies with solid processes, excellent Customer Success, and world-class support will have some level of churn which can be attributed to factors they just can’t control and that is OK.
Aiming for 0% churn sounds like the perfect dream but it’s actually not as useful for scaling your business as a 3%, 4,% or even 5% churn rate would be. Having some level of churn tells you that there are some areas for improvement and that for some reason, people are leaving. This means that you have work to do and that your service can be improved on or maybe your sales funnel and lead generation can be improved because maybe these people were not a good fit to start with as long term customers for your WordPress care plan business.
So, accept that churn is here to stay, run with it, learn from it and take actionable steps to reduce your churn rate down to that 3-5% range and measure monthly to keep on track.
What can you do to reduce your churn rate right now?
1. Track, track, track
This is a false start, but I’m going to shout this before I kick off my true number one churn reducing tip on this list. Track it. Make sure you’re tracking new customer numbers (MRR) and customers who cancel (churned MRR) – You’d be surprised by the number of agencies running care plan services not tracking this data yet wondering how they can stop people canceling their service. How can you track this data? It can be something as simple as a spreadsheet or you can automate things using Zapier, or use a system like Baremetrics which hooks up to Stripe for you and logs canceled and new plans among other huge amounts of data.
2. Show your clients the value
Care Plan services aren’t ‘set and forget’. If your clients don’t see the value they’re getting for their monthly payments, even though you’re working your butt off managing their sites, you have a high risk of churn there. Look for ways to communicate what you’ve done for your clients. That includes updates you’ve run and troubleshot, security issues you’ve prevented, speed optimization results, uptime monitoring etc. The more tangible value your client sees from your service the better. This actively reduces the chance of them churning when they’re reviewing their expenses. One way you can show clients this value is through automated weekly reports branded as your agency. BlogVault is a great option for this. If you manage a smaller amount of clients and you have the time to hop on calls to discuss what you’ve done to keep client websites safe, even better. This isn’t scalable, though, but when you’re starting out it’s a good idea. Spending the extra time to hop on a few calls leads to super happy customers and happy customers are more likely to generate more business through referrals for you. (Increasing your overall MRR).
3. Manage & track delinquent customers
A huge amount of churn could be coming from customers whose payments are failing. If you don’t have a process in place to catch these failed payments and reactivate them, they could fall through the cracks and increase your churn, even though the customer may not have intentionally cancelled. Failed charges can happen for many reasons; insufficient funds & bank blocks tend to be pretty common. I recommend using a mixture of automation emails that trigger at different points (check out Baremetrics) and manual reach-outs. Having the Customer Success team reach out personally increases your chances of resuming service a bit quicker. You can even use Slack notifications each time a payment fails which prompts you to follow up when you need to, on top of your automation emails if they aren’t successful.
4. Review your pricing
You may need to review your pricing. It might sound surprising, but a low price point is likely to lead to higher churn rates than your higher-priced competitors. There are a few possible reasons for this. One is that clients seeking and buying lower-priced services tend to have lower, unsustainable, or unpredictable monthly budgets. Businesses with lower budgets or those seeking discounted rates will quite often be the client that demands the most resources from you.
Pricing too low doesn’t allow you the room to scale your business. You need to scale your resources, your systems, your software and you can’t do that on low MRR. You’re providing huge value to clients, you deserve to be paid for that value to be able to continue delivering what your clients expect. Bear in mind that you’ll almost definitely see a higher churn rate a month or two after raising prices. That is normal, you won’t still be a good fit for everyone you’re currently working with and some churn is to be expected here, but your new price point will attract newer higher quality customers who will more likely stick with you in the long run. You’ll want your current MRR to be in a good position to transition your pricing before you push the button on this one.
5. Review your cancellation process
Do you really want that big cancel button on your website for anyone to press at any time? A preferable cancellation process would involve a conversation with a potentially churning client before they leave. Get that feedback, attempt to save them and as a last resort, think about weighing up the benefits of offering a one-off discount or account pause. Let’s say a customer needs a couple of months to fix up their finances, considering a pause option leaves communication open with your client and allows you to reengage the client in a month or so to see how things are. A clear cut cancellation does not. Having said that, make sure your cancelation process is clear for your customers, and if a customer does outright need to cancel, process the cancellation quickly and hassle-free for them. No one likes to be stalled when they just want to cancel.
Keeping tabs on your churn rates and adjusting your business monthly can lead you to great results for your clients and your business. If you implement any of these strategies, I’d love to know how things go!
This post was originally a talk presented at the WPMRR Virtual Summit.
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