Been running a bootstrapped ed-tech B2C SaaS startup since January 2023, started charging in April. We’ve been growing in revenue around 9-15% MoM but our churn is ridiculous, it’s around 21% and has been flat there for around 2 months (was previously 30-25%). Our growth in other metrics is great, we’ll hit $10k MRR this month but that churn number frightens me and I don’t know what I can do about it.

We are a freemium site and around 2% of our users are returning users (this lines up pretty much exactly with our conversion rate from free to paid accounts). Currently have around 125k users total, of which around 4k have paid for something and 1.7k have active subscriptions.

  • TallDarkandWittyBEnglish
    1·
    10 months ago

    From what little I can tell, you have a weak product market fit. People like it but don’t love it, hence the low sale price and high churn.

    At this rate, you’ll have difficulty getting to a sustainable or hypergrowth phase. Something needs to change.

    A few ideas.

    1. Prep for a pivot. Talk to many customers and ask them what it would take to get them to pay 2x what you’re currently charging. Ask them what’s missing. Ask them what problems they’re focused on most at the moment. Just get super curious with them to try to stumble across an opportunity to sell them something expensive and high urgency. Without those two things, a B2B tech biz is very, very hard.

    You might get lucky, and it’s just a few feature changes. Maybe it’s a buyer change, like a higher-up. But perhaps it’s a different product altogether.

    1. Explore ways to expand within existing customers. Churn sucks, but the right metric is net churn or “net revenue retention”, which includes expansion. You want NRR to get above 110% soon if you’re trying to build a subscription service.

    2. Sell bigger deals, higher up the org with multi-year contracts. This is a tried and true way to drive churn down for a few reasons. If it’s bought higher up, there is more commitment within the org to the project and coordination to deploy and make it successful. The higher the price tag, the more people are wedded to success of it too. And the longer the contract, the more likely people are to push through a struggling project toward success than just bailing on it and canceling.