How to Reduce SaaS Churn Rate

Losing Logos Faster Than You Can Win Them?

how to reduce churn saasAs a growing company, managing your SaaS churn rate is — and should be — one of your top priorities. However, it’s a complex process that companies think about and calculate differently. Business intelligence provider ProfitWell showcased four separate calculations that many companies use — each of which has advantages and disadvantages. Regardless of how you calculate it, understanding how to reduce churn in SaaS is the goal.

There are countless strategies and approaches out there for reducing your SaaS churn rate that you can explore (we particularly enjoyed this 5-step approach), but it’s important to align efforts to reduce churn with your growth strategy to maximize the impact. If you want to lift your revenue to that next watermark, everything will need to be focused on this goal.

Efforts to reduce your SaaS churn rate should naturally align with your growth strategy as they are closely connected, but at a high level the focus should be on strengthening customer acquisition and customer success. Depending on where you are in your growth journey, you likely already have various tactics and solutions in place on both fronts.

But going at the same pace and using the same resources to apply to these efforts will not result in significant progress. When you’re ready to scale to the next stage of growth, what’s needed is a funding solution that enables you to accelerate not only solutions to help you reduce your SaaS churn rate but also your overall growth pace. Venture debt financing is the ideal solution for this need.

Here, we’ll explore a few ways that debt funding — as opposed to venture capital or other growth capital solutions — enables you to achieve the results you’re looking for when it comes to new customer acquisition as well as customer success and retention.

Go deeper: Download a free copy of Customer Success: The Key to a Growth-Focused SaaS Company for insights that strengthen retention and more.

New Customer Acquisition

It’s obvious, but a major contributor to reducing SaaS churn is winning new subscribers to your platform. Their added revenue and ongoing relationship with your company help to reduce the impact of customers that cancel their subscription. Of course, revenue from newly acquired customers must exceed that of customers lost over a specific period, and that isn’t always an easy thing to accomplish. And as we all know, winning a new customer is more costly and time-consuming than maintaining or growing an existing customer.

How does SaaS debt financing help here? It provides the growth capital you need to accelerate what’s already been working well for your business and to explore additional solutions for obtaining new customers. Examples of these include:

  • Investing in strategic inbound marketing efforts to target ideal customers
  • Developing a more robust content marketing program to win search traffic
  • Building or expanding upon paid digital and social advertising initiatives
  • Launching or expanding the use of advanced marketing automation tools
  • Hiring experienced leaders for your marketing and sales teams
  • Investing in sales-focused solutions for increasing customer close rates
  • Get additional marketing acceleration insights for your business

While new customer acquisition is more costly than customer retention, the latter has its limitations — so you’ll always need to be looking to expand your customer base with companies that can benefit from your solution. Venture debt financing helps you reach more of them, more efficiently, and sooner.

Growing step-by-step: Learn how venture debt financing can be put to work to grow a SaaS business in this start-to-finish example.

Customer Success & Retention

While it’s always exciting to onboard a new company to your platform, there’s nothing quite like customer success and retention efforts for reducing SaaS churn rate. You’ve worked hard to build a solution that solves their problems and to win them as a subscriber. They’ve come to trust your platform and are already integrated with you. What could be better? Plus, the chance of upselling existing subscribers is higher than selling to a prospect.

How does SaaS debt financing help here? Similar to new customer acquisition, SaaS debt funding helps you accelerate your current retention- and success-focused efforts while providing capital to explore and evaluate additional opportunities. These include:

  • Hiring more team members to create a stronger customer success function
  • Investing in more intelligent analytics solutions for understanding behavior
  • Developing more robust and automated solutions for customer communications
  • Expanding sales and marketing efforts targeted to existing subscribers
  • Developing and testing retention strategies that result in longer relationships
  • Investing in sophisticated onboarding tools to ensure success from the start
  • Identifying and addressing platform shortcomings through development

Customer success presents a significant opportunity to reduce your SaaS churn rate by strengthening your relationships with existing subscribers and helping your newest customers become more successful up front. It’s an ongoing effort and one that demands just as much investment as new customer acquisition. It should have a clearly defined strategy and process and should be consistently evaluated to ensure those efforts are moving the needle as much as possible. Your venture debt financing resources will be extremely useful in maximizing the impact of this essential part of your growth.

Expand your knowledge: Get more insights into where you should be focusing your attention with our free ebook, Growing Your SaaS Business in a Competitive Market.

One Goal, Multiple Solutions

While SaaS debt capital has numerous advantages, one of the best is that it’s available to you in multiple forms that enable you to focus on the goals and efforts mentioned above while retaining as much of your hard-earned profit as possible. While you’ll have to make payments according to the agreed-upon terms, the type of venture debt financing you choose will contribute toward reducing your SaaS churn rate. You can learn more about the different types of debt financing and their requirements here.

Additionally, venture debt allows you to take advantage of tranching — or using portions of the loan amount as opposed to the entire sum. This helps you avoid paying interest on the entire loan amount. Whenever you’re ready for another distribution of capital, you’d simply let us know. Along the way, you can re-borrow any principal you’ve paid — extending the life and utility of your debt capital. And because River SaaS Capital doesn’t take warrants, you’re truly free to grow your own way — no equity, no dilution, no lost board seats, and no risk of having to sell stock at a fixed price. You’re in control all the way.

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