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| - SaaS Churn and Short-Term Customers: The Contrarian View | SparkToro Ever wonder why so many business software companies make it so darn difficult to start using their products? Or why subscription-focused tools are so https://linkeddata.uriburner.com/about/id/entity/https/sparktoro.com/blog/saas-churn-and-short-term-customers-the-contrarian-view/#content Software as a service SaaS Business software business software Product products Churn Churn rate How It Works Rand Fishkin https://sparktoro.c
- SaaS Churn and Short-Term Customers: The Contrarian View | SparkToro How It Works Plans About Resources Blog Log In Try It Free Log In SaaS Churn and Short-Term Customers: The Contrarian View By Rand FishkinFebruary 2, 2021 Ever wonder why so many business software companies make it so darn difficult to start using their products? Or why subscription-focused tools are so obsessed with making it hard to quit vs. making it easy to sign up? Why don?t these SaaS (software-as-a-service, aka subscription) companies want customers who might only need their product every few months or even only once each year or two? Incentives. Specifically, the incentives around how their businesses get valued by investors or potential buyers. 99% of subscription businesses, whether they?re selling customer service software or marketing research tools or video-calling apps, are trying to do one of two things: Raise money from institutional investors (i.e. VCs and the ecosystem of angels + seed funds around them)Get acquired by companies who?ve raised VC and/or plan to IPO These investors value predictable growth, and they?re willing to pay a premium for companies that can show low ?revenue churn.? That is, they ideally want every credit card that paid money last month to pay as much or more money next month. A churn graph with pink bars like this is incredibly scary to investors and acquirers, but maybe it shouldn?t be all that scary to founders (or customers) There are some logical reasons behind this, including: It?s great to have predictable income, so you can make long-term expense and profit budgets without much stressLow revenue churn is a signal your product is very difficult to live without (which suggests that even if things in the broader economy or with your market get rough in the future, you?ll probably still keep a lot of your customers)If you?ve got low churn, every new subscriber is likely to be with you for a long time, so you don?t have to spend big efforts on marketing to keep growingYou can spend more money on paid acquisition to get new customers knowing that li
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