What Is Churn? SaaS Churn Prediction EXPLAINED

About this video

Dan Martell explains SaaS churn, recalling a Flowtown board meeting where he reported, as he tells it, about 14% monthly churn and learned from an investor why that was alarming. He distinguishes logo churn — accounts lost — from revenue churn. The logo calculation compares the same cohort at the start and end of a period: 100 customers falling to 90 from that cohort is 10% churn. Net negative churn, or net revenue retention, is positive when expansion from existing customers outweighs losses: a cohort spending $100,000 that grows to $130,000 is at 130% net revenue retention, driven by cross-sells, upsells, add-ons and a value metric that raises average revenue per account. He gives acceptable monthly logo churn benchmarks as, in his framing, 3-7% for SMB, 1-2% for mid-market and about 0.5-1% for enterprise. To predict churn he recommends a Customer Engagement Score — his Member At Risk Monitor — sorting accounts red, yellow, green and purple (referenceable), with a documented playbook for each colour, watching signals such as falling logins or an account owner changing jobs. Finally, capture cancellations to learn and save accounts, feed reasons back to product, and, he suggests, allocate engineering time roughly 20% to bugs and platform, 60% to reducing churn and missing features, and 20% to innovation.

Key takeaways

• Measure logo churn on the same cohort over a period, and keep it separate from revenue churn.
• Aim for net negative churn: expansion revenue from existing customers should exceed revenue lost to cancellations and downgrades.
• Benchmark monthly logo churn by segment — Martell cites 3-7% for SMB, 1-2% for mid-market and about 0.5-1% for enterprise.
• Use an engagement score with red/yellow/green/purple tiers and a playbook for each to intervene before customers cancel.
• Capture every cancellation reason, offer a save or pause where fitting, and feed the reasons into the product roadmap.

Episode details: published November 2, 2020 · 11:09 long. Summary written by Self Growth Videos from the episode itself. Business results and any income figures mentioned are Dan Martell’s own claims, shared for education — they are not typical or guaranteed.

← Previous: How to Calculate Your Customer Acquisition Cost (CAC) in 3 Easy Steps! · Next: Right Way to Build an Outbound Sales Team with Aaron @ PredictableRevenue - Escape Velocity Show #40 →

All Dan Martell videos · Dan Martell profile · Dan Martell (official site)