Unpacking the Churn Formula: A Key Metric for SaaS Success

Every business owner in the SaaS field fears that their customer base will shrink over time. That’s what’s called “churn,” and it can slow down growth and hurt profits if it’s not dealt with properly. In fact, Statista research shows that the average annual churn rate for SaaS companies is between 20% and 25%. But what if the key to controlling churn isn’t just lowering it, but also figuring out how it works? That’s where the churn formula comes in—a key metric that tells you why customers leave and how to keep them.

This article will explain the churn formula, look at its role in the success of SaaS, and talk about how tools such as HubSpot and services from 9H Digital can help you use data to turn churn into a growth opportunity.

What is the Churn Formula, and why does it matter?

At its core, the churn formula is a straightforward but useful way to figure out what percentage of customers you’ve lost in a certain amount of time. Here is the most common way to write this formula:

This simple-looking calculation is the key to a treasure trove of useful information. By keeping track of churn, companies can:

Look for trends: Do most of your customers leave after a year, or do some leave after the first month?

Find weak spots: Are certain price levels or features linked to more customers leaving?

Make predictions better: Predict future sales based on how customers are staying with you.

According to the Harvard Business Review, keeping a low churn rate is very important for SaaS companies because getting a new customer is 5–25 times more expensive than keeping an old one. Figuring out your churn formula can help you decide which strategies will bring in the most customers over their lifetime value (CLV).

Different Types of Churn

Not every churn is the same. It’s important to know the different versions of the churn formula in order to get the most out of it:

Customer Loss: The usual way to figure out how many customers you’ve lost over time. This metric has a direct effect on the number of users and subscribers.

Revenue Churn: This is the amount of money that is lost when accounts are closed or upgraded. Income churn helps you keep track of how well your efforts to keep customers are doing financially.

Churn: Willing vs. Unwilling

Customers cancel on their own because they are unhappy, can’t afford it, or want to switch to a competitor. This is called voluntary churn.

When payments fail or credit cards expire, there is involuntary churn. It’s easier to deal with, but it still has an effect on revenue.

By using the churn formula across all of these groups, SaaS companies can figure out what’s wrong with customer retention and make solutions that work for each group.

Why Customers Leave: It’s Not Just the Numbers

Churn isn’t just a number; it tells you about how your customers feel about your business. Customers often leave for the following reasons:

Problems with onboarding: Wyzowl says that 90% of customers think a company could do better with onboarding.

Lack of value realisation: Customers leave when they can’t see how their money will be spent well.

Zendesk says that 50% of customers leave a company for a competitor after just one bad service experience.

Concerns about prices: Customers may leave if the prices are too low or too high compared to competitors.

When SaaS companies use both qualitative feedback and the churn formula together, they can get to the bottom of why customers leave and make improvements based on data.

How to Get Less Churn How to Use the Churn Formula

Spend money on onboarding: You can use the information in your churn formula to find out if customers are cancelling their subscriptions early. If so, make your onboarding process stronger. HubSpot’s CRM and other tools like it can help you keep customers interested by automating onboarding emails, training materials, and check-ins.

Make customer service more personal: Platforms like HubSpot give you data-driven insights that let you keep track of your interactions with customers, divide users into groups based on their behaviour, and deal with customer dissatisfaction before it causes them to leave.

Improve your pricing strategies: If a lot of your revenue is going away, you might want to look at your pricing levels. To meet the needs of a wide range of customers, you might want to offer a variety of payment options or scalable plans.

Keep an eye on product engagement: When churn rates are high, people don’t use the product as much. By adding customer behaviour analytics to your churn formula, you can find out which features customers like and which ones they don’t.

Take Action on Feedback: Polling customers who leave can give you a lot of useful information. Use these answers to improve your products and services and deal with complaints that keep coming up.

The Part HubSpot Plays in Managing Churn

HubSpot’s powerful tools give you an edge when it comes to using data to effectively manage churn. This is what HubSpot can do to help:

Integration of Data and Automation: HubSpot’s CRM automatically combines customer data from different points of contact, which helps you keep an eye on trends in customer churn across all channels.

Customer Insights: You can look at churn data to find patterns and act on them right away with detailed reporting and dashboards.

Retention Campaigns: You can use HubSpot’s marketing automation tools to make targeted campaigns to keep customers by looking at how they behave and where they are in the buying process.

Streamlined Communication: Emails, reminders, and follow-ups that are sent automatically can help cut down on customers who have to leave because they can’t pay or aren’t interested.

How 9H Digital Adds to What HubSpot Can Do

Tools like HubSpot are more useful when you use 9H Digital’s services. Our team makes sure you have everything you need to act on churn formula insights, from custom retention strategies to advanced analytics systems. 9H Digital can help you turn data into useful results, whether you need help making content that educates your customers, setting up workflows in HubSpot, or looking at churn trends.

Take Charge of Your Churn Right Now

The churn formula is more than just a number; it’s a way for SaaS companies to look at their efforts to keep customers. You can use tools like HubSpot and learn about why people leave your business to turn this metric into a powerful growth driver. Using data to guide your strategies is key, whether you’re trying to improve onboarding, make customer experiences more personalised, or fill in product gaps.

Are you ready to learn how HubSpot can help you stop people from leaving your site? Today, set up a personalised demo with Ale, our HubSpot expert! Figure out how to use data insights in your daily work to easily build long-lasting relationships with customers. Book a call here.