Don’t Get Burned by Churn

August 10, 2011 – 10:07 pm

Like so many of the most important SaaS metrics, there is no universal definition for ‘Churn’ (see here and here for a great exploration of the term).  The latitude to define churn in multiple ways across separate companies is a problem, but it can be a HUGE problem if you define it in multiple ways within your own company.  The most sinister part…it isn’t hard to do.

All it takes is two people working on two separate spreadsheets.  Anyone who has tried to keep some spreadsheet rigor between multiple touches and multiple emails knows how easy it is to end up with different results (or errors).  Bang. Zoom.  Now you have two different churn rates.  All you need to complete the chaos at this point is for the CEO (or worse VC’s that you are trying to get money from) to ask ‘what is the churn rate?’

Define your churn rates consistently within your organization.  Even if an external party can punch some holes in your formulas, at least they are all the same!

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