The only silver bullet to mitigate churn is value
Today on the show we have Paul Lynch, CEO at Chargify.
In this episode with Paul, as a venture partner at Scaleworks we talked about their focus on investing in companies and operating them to drive growth, how they decide which companies to invest in and the enormous impact churn and retention has on making their investment decisions.
We also discussed how Chargify sets targets and the metrics they need to focus on, why a data analyst should be one of your first hires, or not, and lastly... is there such a thing as acceptable churn.
Andrew Michael: Hey, Paul. Welcome to the show.
Paul Lynch: [00:01:28] Andrew thank you for having me on.
Andrew Michael: [00:01:30] It's great to have you for the listeners. Paul is the CEO of Chargify a billing and subscription management platform built specifically for modern B2B SaaS businesses.
Paul is also a venture partner at scale works, invest in and operates B2B SAS companies. And Paul started out his career in sales and then moved on to LTE roles and in another nine. So my first question for you, Paul, is what's it like not only investing in companies, but then moving in and operating into why have you chosen this model?
Paul Lynch: [00:01:58] Great question. And again, [00:02:00] under thanks for having me on From a scale of works. And from an investor perspective we saw, we see a huge amount of value in the market. It's under-tapped why is that? The businesses that we look at from the scale works perspective, typically they're doing between sort of three and $9 million in revenue.
Founder led they're mature companies with a strong focus on product. So we want to operate those bits. We feel these are businesses that are built very strong products, but for whatever reason they really haven't been able to scale or get these businesses going very strongly. Why don't we choose three to $9 million?
We choose this revenue range because if you're five to eight years old and you haven't got about $3 million venture capital is not gonna want to know you. If you haven't the hockey stick to after five eight years. You're probably not going to. And if you're below 10 million, then private equity doesn't really want to know you because getting meaningful distributions of dividends out of businesses, like that is very difficult because it's small.
So we go in, we have our own thesis around how we should businesses. Typically we invest strongly in sales and marketing. We take these very strong products. We optimize them, we get the sales and marketing engine [00:03:00] running and we start to grow them. What is it like? I think, these kinds of finders, they're looking very often for exits after eight years from a business that they felt, on their first raise was going to be.
A billion dollar unicorn, and now eight years in, they realized that something hasn't clicked for them, very difficult to put your finger on it as the founder CEO, when they say, us, it's an old adage and I'm not saying eight years is quick, but, fail often fail quickly.
These guys want to move on to do something else and not going to get the exit that they have expected. We can maybe get fair markets. I think those businesses, we put our own people and we operate them. We can sales and marketing going and, that's that, that effectively is the model.
Andrew Michael: [00:03:36] And how many are you deals like this?
Are you typically doing at a time? Is it really like just to acquire one and then really focus double down on that? Or are there multiple companies, like as a.
Paul Lynch: [00:03:47] I, we there's been two funds. I as I said I'm not a general partner within, within, within scale works on venture, but across those two phones there's about $150 million raised.
They've done in the region of, I think, 16 or 17 equity. Of which [00:04:00] like eight or nine primaries I would have gotten involved with them early on when they acquired assembler, which was the sort of first acquisition in fund one. I came into leaders and we successfully grew that business over 300%, just under 300% over three years.
And we then successfully exited that to a business out of Houston called Idera that's backed by HGC capital and they bought us as part of a stack roll-up and the, we were the fifth or the sixth acquisitions they've done that year. So it's busy. We're always looking for add-ons, we're always looking for additional sort of acquisitions, which can add value to any of the portfolio businesses.
The likes of assembler post to the acquisition of ascend, but we would have acquired my guide. We would have required cornerstone. One of them being a desktop management tool for source code. Good. One of them being a codependency battle, I'm in charge of five. We acquired prorata, which was a Reverend.
Yeah, the model is, it's a broken one. W we are not investors more so than we are acquirers, but we're, we are we're acquirers for growth. We're not acquire has [00:05:00] from a traditional private equity perspective where we're happy to buy businesses. And then, squeeze hide our model through dividends.
Nope. Every penny generated many of these businesses, if they're running at a profitable level, gets reinvested.
Andrew Michael: [00:05:12] Very interesting. Very interesting. So you obviously then have a, quite an interesting perspective, I think when it comes to churn and retention as well, because you're not looking at these businesses, like from a typical investor hat on where it's okay.
I'm just going to put the money in and then let the founders figure this out and make things happen. You really need to come in and make things happen and make these changes. How are you evaluating these businesses going into them? Like, how did the decision process go? And like how much does churn and retention impact the decision on the businesses that you work with?
Paul Lynch: [00:05:43] Enormously in answer to the second part of that question. But w I've always had to maintain that. There is no magic number or insurance. There is no one that you can wave. Yeah. We'd like to run our businesses. Like all businesses need to be run to KPIs, to goals, to milestones.
And [00:06:00] to do that there needs to be a goal around what your trend number should be. But. That is different in every business you're going to require across every single target market or category your customer. Is it a B2B too? Is it a, B to C to, what does the category look like?
Is it a heavily populated category? Is there a lot of competition? Are you a substitute product? Can you be easily substituted, and and replaced all of these things have like before you get into hiring or hierarchies or org structures or anything else, just start, then you need to understand that.
Yeah. What is the cost of acquisition of new customers? Like I look at the likes to say moving into the SaaS space for a second digital ocean going back, eight or nine years ago, this was this was in the hosting space, low value containerized hosting. I mean that market was like to say that it was under pressure from Alison web services is the understatement of the generation, basically they were coming in snowplows yet DigitalOcean were doing really well.
Although they have enormous, the highchair and their cost of new acquisition was so low. They were replacing it and continuing to grow. All of [00:07:00] these factors need to be taken into consideration before you can, before you can really get into the nitty-gritty around what that should look like and how you should model it.
From an acquisition perspective, looking Let's take a use case here so we can maybe get, we can pin it down a little bit more. If we're looking at a B2B to, let's say Chargify a B2B tool in the financial service, the FinTech sector, which is heavily embedded into this doc is based on integrations and by the integrations, not a point tool, but into you're a Salesforce of the world, your HubSpots of the world, et cetera, et cetera.
W should churn and this be like a couple of percent a month, is this a substitute product? What is the cost to acquire new customers? What does the sales motion look like? The short answer is this should be a sticky to talk about each other. We have very low churn in this business because we're right in the center of every stack, We're looking at a case by case basis, should this be a sticky tool?
If it's a sticky tool, then there should be low chair, but she'll be so 1% when you're getting into elastic, you're tools where there's high competition and there's the high potential to [00:08:00] substitute. Then maybe it'll allow it straight upwards a little bit towards the 2% mark.
But if you are going to do that, At the same time, you need to look at what your cost of acquisition is per new customers, because if you're happy sharing that 24% of your business on an annual basis and patting yourself on the back, if you beat that and your cost of acquisition is high.
Yeah. Very quickly. You're going to be in trouble as a business very quickly. You gotta be acquiring more than you're turning it on retention, NRR, net retention, right? Absolutely crucial. Is there or at a hundred percent or above what should that be? Strong businesses with strong growth motions should be looking at well over a hundred percent in terms of their net retention rate on a monthly.
That's what we would look for. So
Andrew Michael: [00:08:38] you hit on a lot of that, the points now as well. I think the whole premise of the show as well, in the sense that there's no silver bullets, like I never ever talk about metrics and benchmarks and for this specific reason, because every business is different.
Every business is unique and I've had feedback on the shows are like, why don't you press them? Why don't you ask them all? And it's Because it's meaningless for your business. You need to understand your customers. [00:09:00] You need to understand your space. You need to understand like your customer acquisition costs and figure out like what's a good target for you because hearing other people's and other company's benchmarks is just going to set you off on the wrong track.
And in some cases you might be undervaluing or you might be okay,
Paul Lynch: [00:09:15] You're so correct. But don't get me wrong. Efficient organizations are run to goals, to KPIs, to milestones there's processes, there's workloads that need to be adhered to. So just because it's very difficult to manage this item to measure what it should be does not mean you shouldn't have a, have a horizon either in terms of what you're working towards.
Not like people need to know what they're. Stop at every level of the company. Are you a CEO reporting in school board or be you a junior customer success manager reporting into a manager makes no difference. Like for organizations to be successful, the individual contributors to the employees, the management team need to know what they're accountable for.
And that accountability needs to be to me at a turn level of measure, that's a percentage of installed based insurance on a monthly basis. The magic [00:10:00] is getting to the right number.
Andrew Michael: [00:10:02] That's what I want to chat about now, let's talk about the magic. So we just said that, okay. It's very difficult to look at benchmarks, very difficult to say, okay, like this is the right number.
How do you then go about figuring out like what you set your target sets and what you can and counter improve when it comes to generate your business. So how would you go nine to let's? The latest company may be Chargify like, how are you going about setting the targets for the team? What are the benchmarks you're setting internally?
Paul Lynch: [00:10:29] So we don't do anything groundbreaking here that you're not. Can I hear from anybody else? I wonder if I can. Me we have always traditionally based in terms of previous year's performance we look at it from a we look at it from an investment perspective. That's going into the individual, customer success organization.
And then we try to revolve that organization over time. Obviously just like sales or just like marketing. If you're going to be investing more money in this and you're going to be increasing CAC, then you want to be seeing higher sales numbers and acquisition numbers coming back in same applies with customer success, technical support, onboarding, et cetera, et cetera.
[00:11:00] If this more investment coming in there, then there needs to be a checks and balances need to have it on the other side as well. You need to see a decrease in terms of churn. We're very tight. This is a key unit metric within our unit economics that we measure. Like we meet week I'm in weekly meetings, as far as this is concerned.
And as I said, I'm not going to get into the unit economics and the specific metrics that we have, but they're low yet. I'm still in every, I'm sitting in a meeting on a weekly basis to make sure they remain there. Like the old adage of winning a new customer is 22 times more expensive than retaining an existing.
But that's true. Everyone that you've operated with. Andrew, you understand that it's hard, it's 10 times easier or 22 times easier to just innovate design and manage your existing customer base. Treat them with respect. Don't try to gauge them than it is to go ahead. And when you ones the magic details, right?
So set your number be and say 1%, right? Don't. Wash your hands of it. This is the Mo one of the most important things you're going to do as a CEO of any business and the finder of any business is to keep your customers happy. [00:12:00] They are your best salespeople. When you have large sort of churn in your business and visible there are, this is a symptom of an underlying illness in your business.
Even if it isn't rectified, it will destroy you because they will go into the market and they won't be advocates. They won't be promoters measure your NPS net promoter score. Understand why? Take the verbatims. Why are businesses churning from underneath you? What are you doing? Again, understand, like when I talk about pricing and turning the Mary's very close to pricing as a lever.
You know what value you're delivering into your installs? No, what problem you're solving? So know your value, know your customer, know your competitor, all three of those things. Then you can set realistic kind of metrics. If you're changing an investment cycle. If you're going to bring on a dedicated onboarding team, if you're going to look to separate customer success or bring strategic customer success in, or is that targets around install base, both look at technical support by, know, I take that.
I, every time you invest in, in your [00:13:00] your. Personal success or your retention functions, then, understand that there has to be a balance on the other side here, what is this going to do to my prevailing turn rates within my business? What is it going to do to my retention rates?
What's it going to do with my install base growth rates and new acquisition in the install base. If that's the thing That needs to change your measurement metrics. Okay.
Andrew Michael: [00:13:20] That's fair. Interesting. So when you're looking at budgets, then you're saying a daily basis, we want to decrease churn by X percent.
This will bring us X percent in revenue can afford to vent and invest X into customer success or sales. And we expect to see a return on that in terms of the churn number, going down as a result. That's how you're measuring it. Yes. Yeah. Very interesting. Also strongly agree with you what you were saying as well.
Like when it comes to subscription businesses, I th the whole name it's in its name. It's like a subscription business. If you're not able to keep people happy and you're not able to keep their subscription, you essentially don't really have a business. So I think, yeah. Core it's for me, it's the number one metric.
Obviously the show is called shared FM, [00:14:00] but it is core to central to running like a successful SaaS business. And one thing you actually mentioned, which is quite interesting, it reminded me of an episode. We recorded with Emeric Ernoult, from Agorapulse and. Similarly, like they were trying to figure out for them, which like what should be the target for the team when it comes to reducing churn.
And they'd run a, quite an interesting exercise where they said, okay, let's look at our tunics surveys. Let's see what are the main reasons that are coming through and let's exclude the reasons that are outside of our county. For example, like we went out of business because they deal heavily with SMBs is not something that they're within their control to fix.
They're not going to save that business from going out of business. And that essentially what it allowed them to do is set okay. Care, like whatever the number was, it's just arbitrary number was 50% cause obviously not 50%. And we wanted to reduce it by just 10%, instead of saying a random number.
And now they said, okay, wait a second. 50% of our churn comes from businesses churning. So we only have effectively 25% that we can within our control to fix. And then they [00:15:00] set a target based off of that. That was a little bit more realistic rather than just trying to bring the whole member down. They said, okay, which segments of this?
Can we have an impact on as a team? And then what are the initiatives that we can do to drive that back and forth? It was also another interesting way to look at like how you go about setting targets when it comes to reducing churn. I don't know what you think about that.
Paul Lynch: [00:15:17] I. Again, I love it. I'm not sure that it's right for every business.
But like I bring it back to know your costs, know your value, the problem yourself, your customer, know your competitor understand get instantly that you really understand what your business is. Clearly these guys have done a bit of work around their business and they've looked at their churn verbatims and they've said, okay, so yeah, these businesses are going out of business, so it's not in our power to retain them.
That makes sense. Okay. You want to have the highest impact you can with the limited resources which we have in our businesses. The challenge I would hope to them is a broader kind of challenge. Which is why are they going out of business? Why is there a large part of your [00:16:00] installed base that's going out of business?
Is your target market. Or is your target market broad enough or is your geographic reach broaden? We have customers, I think at last count, correct me if I'm wrong, but it's something like a hundred and ninety three, seven stakes on planet earth. I think I last times assembler.
In 54 of those countries with cluster presenters. Okay. That's a broad geographic reach. If there's an economic danger and in north America, into the COVID pandemic, et cetera, et cetera, and all your customers are in north America, then it stands to reason that you're going to have an economic impact on your install base.
What I know, sorry. COVID-19 is a terrible example here because it's just a global level thing. You know what I mean is going to be hit harder than a housing crisis in Asia, a banking crisis in the UK and Ireland, where are your customers and why are they going out of business? Also if you look at churn up by, by logo number is turned by actual revenue.
What's the concentration of your top 10, your top three or top five, or your top 10 customers in your in-store. [00:17:00] I looked at a data center business some years ago. And if you to acquire in a different organization and 85% of their revenue was type of one customer, that customer was on a roading three-year contract of which we were 18 months.
But it's a non acquirable business. Yeah, exactly. So understand that so yes, there were certain things you do impact you can't impact the end customer in terms of their ability to remain self. What you kind of impact though, is you can mitigate that by looking at the total number of customers you have across industry and across geographic region to alleviate that kind of potential risks entering humans.
Andrew Michael: [00:17:35] Yeah, absolutely. I think like you pointed out it's very much to do with who your audience is. I think in or pulsars case, like they deal a lot with very small businesses SMBs as well. So I think it just becomes the nature of the game as well. To that extent when you're building a product for that audience, that's yeah.
Ultimately you have the option to go upstream, but does it work for your product or service? I think you need to figure that out.
Paul Lynch: [00:17:57] So it's again, there's no. [00:18:00] There's no magic wand. As we keep going back to, there are certain churn mitigation tactics that you can have in a business like that. 24, like that. I have a contract in place. They're like, if your customers are going out of business, that's your issue, then see if he can drive in advanced payments. So at least you're covering over a say, 12 month fiscal period. Wait, are you getting paid in advance? You're not seeing you're not seeing that that kind of churn and impact, upfront costs, like in terms of onboarding costs, right? Nobody likes onboarding costs, like introducing onboarding calls into your in your organization. In many ways makes your prospect or your customer put some skin in the game because they're paying an advance to get onboarded into use.
So they're going to have a higher perceived value there. These are all kinds of techniques, but you move away from understanding the value that you're delivering. If you didn't provide you in in, into your customer base and different customer bases is relevantly distributed across geographic region.
And industry and physical size. You shall be able to mitigate these by delivering value [00:19:00] understand that.
Andrew Michael: [00:19:00] Saying that those all listening as well now is actually one single metric that you focus on and that's value delivering value and figuring that out for your customers. Like the closer you can get to that.
We've also had some interesting episodes on this thing. One of the ones I really loved was from GoDaddy and how they went about measuring value was they had a site builder It originally, I think they were measuring like the number of installs or the number of people, setting things up. And eventually what they realize is, wait a second, our people don't come to us to create websites.
They come to us. If they're a hairdressing salon to get bookings, if they're a restaurant to get orders, if they're a new e-commerce store to drive sales and we have this data, we can measure this. And this is what's value to them is actually making those bookings, getting those deals. And then they switched their metrics to really try and see, okay, how can we drive?
To get to the end value that they want and then reverse engineer. What are the steps of our successful customers taking to get there? How did they get there? And it's really interesting. I don't think all businesses have the luxury to understand the value of, to be able to measure that value. But the closer you [00:20:00] can get to measuring that, I think that is.
Definitely the holy grail when it comes to metrics
Paul Lynch: [00:20:04] tools like good tools coming into the market, like ours that are in the market. I So look, it's a Pendo and product adoption, as you're releasing features across your platform, what are customers using you for? Yeah, no you're spending development cycles, building out a specific tool that does X, Y, Z.
Your ability to release it. You do a press release tech crunch, run it. Everyone applauds themselves. You have a couple of beers and smoke a cigar, and then no one follows up in terms of what the adoption has been. That's very common cause it's businesses that aren't looking to bring data and insight into their org.
It's lazy. And it's we don't time for that. Anecdotally, I know that this is what I want. Cause I talked to my customers have told me that no, five very vocal customers that have been installed based in the past and customers and told you they wanted it. But this is what you're hearing, but you're not measuring what the adoption is like.
So you're not really understanding the value and how your applications being used by your. Yeah. Like day to day to day to day to day segments. Yeah. I was being [00:21:00] interviewed recently and it was like at one point in time, do you bring a data analyst into your organization? I'm like, it's your first hire?
Really, it's that's, it's such a crucial having the underlying. That, that they, this is the insight in terms of the building blocks. Why would you bother building a house? If you didn't have plans person, you do, isn't grab a builder and get them to start digging a hole and putting concrete in it.
But if you do a foundation, let's start drawing on breaks on it. No, you go to an architect, she kept the answer the highest, and you started working. That's what you're out of listed.
Andrew Michael: [00:21:30] I had this viewpoint earlier on in my career. I thought like data is the most important thing getting started. And I have a different perspective on this now from you definitely is.
Seeing like in my previous companies that we had raised some capital from investors, like they're all about metrics, like having the data, having it available. And I spent time like to have this perfect stack and be able to tell you install rates, like conversions, like attribution, like everything beautifully set up and spend way too much time obsessing over [00:22:00] numbers and let, instead of speaking to customers and I think like joining Hotjar, I was actually super surprised where was what was a relatively like successful company already at the time.
And they like didn't use at all. Like I was shocked came in then I was like, like we flying blind. What's everybody doing? We don't have the numbers available and they just knew their customer extremely well. Like just obsessed over speaking to customers. And I have a different opinion now on this, like this time round as well, like just spending as much time speaking to customers like data, this, I believe it's super, super important.
I headed up business intelligence at our show and was a huge advocate for it. But I think early on in a company. You're way better, like getting the qualitative feedback. That's going to tell you a lot more than the early days when you don't have enough data, you don't have the signals that they're going to give you.
And that's going to be able to inform the decisions and you end up making like decisions backed off of like data. That's not mature enough to, I think, to take actions on,
Paul Lynch: [00:22:55] When I'm saying hire an analyst in terms of at first, I'm not suggesting like God, the good Lord, [00:23:00] no, this is not an well one.
There is no substitute to talking to your customers. Always taught you. Cause I didn't talk to him when we have new customers coming on. We have executive sponsors, that's part of the onboarding process where we talk, how was your experience going? What did you find here that you have expected to find that didn't what surprised you?
What surprised you positively or negatively? Like I love those. You know what I mean? Like there, there is, you got to talk to your customers. This is not an either or in any shape or form. I also like this whole, paralysis by analysis kind of thing in smaller businesses, it's a disaster. Like you go to the 22 immutable laws of marketing.
It's never the product. That's the most the best, one of the wins. Ultimately it's the one that was first to market and captured market share. So don't wait around. For your analytics to tell you when you should launch, get an MVP and market, get customers, use it, talk to them on that data there until but when you are getting leads and measure, see where they're coming from, understand what your pipeline looks like, all of these different things.
I don't believe you. [00:24:00] When by just being on the right side, no, I'm only sitting there with no data being generated or a note. Yeah. Like being driven or on the left-hand side, with just database and not talking to customers, not understanding verbatim and start understanding more contracts that th there's a marriage in there, which sucks.
Andrew Michael: [00:24:17] Yeah, no for sure. I think this for me, in my opinion is also one of the mistakes. A lot of companies make is where they have user research and data analysis, or like business intelligence in separate teams. And I think they really need to be working a lot closer. And I think more and more companies are realizing this, that qualitative and quantitative research.
Works well together, they should be married together and informing each other's work
Paul Lynch: [00:24:42] and the checks and balances here as well, just to finish up on the point, don't forget. So you'll find certain vendors will they'll have a cognitive bias towards moving in a different direction and they'll ask the wrong question so they will talk to their customers, but they don't say wonder don't you think it's a great idea that I would build that gunshots is one of my applications.
I think that'd be a great idea. There you go. This customer [00:25:00] validation, let's go build a whole lot of gunshots, but let's never imagine the adoption of those kinds of shirts.
Andrew Michael: [00:25:06] No, I agree on that. It's it's super important to understand your own incentive biases when doing qualitative research, not to ask leading questions, made every mistake in the book, myself trying not to.
Paul Lynch: [00:25:17] I like it. Like I say this from experience and I'm not going to get into this with gunshots is a perfect example. It smell them. Everyone wants them. Nobody's going to use them.
Andrew Michael: [00:25:28] Yeah, exactly. Cool. So I see we actually running up a time, so I want to save time for the two questions I ask. Every guest.
First question is let's imagine a hypothetical scenario, which we use probably not too bad pathetic, but you arrive at a new company and, churn and retention is not doing so great. And the CEO comes to you and say, Hey, like Paul really need to turn things around. Now we have 90 days you're in charge.
My question to you is what are you going to do? But the catch is you're not going to tell me you're going to go speak to customers [00:26:00] and figure out what the biggest pain points are, and then going solve that. You're going to pick one thing from your experience that you've used. That's worked in the past to reduce churn and run with that.
Blindly. What would it be?
Paul Lynch: [00:26:09] Building a true customer success function. Okay. I always see, I see I've seen different kinds of commodity areas of theme across different businesses. Is it a complex onboarding process? Are we losing. Sure. And during the onboarding process now, is there a product or feature issue technically within the the product or platform that has been left by a competitor and we're not having customer substitute eyes?
The one thing that you can never fail on is by building a true customers. Okay. And by customer success like that is driving the success of your customer from your platform, talking to them and understanding, what are they using? The value levers that you're delivering the platform.
So like often people mistake customer success and use it as a broad term for what, client services. Yeah, it's for me, it's a sub-component of a proper customer support client services team. We have an onboarding chain, you have a [00:27:00] technical support chain that feeds into your engineering function and fixes your boat.
And you have a customer success team and under customer success, you have strategic account managers and you have install-based growth professionals. That's where people fall. That's where companies fall down and it also plays more into net retention rate than it does. Dot invest in that area. Don't hire more and more product leaders don't hire more and more technical support products.
Hire customer success, guys that can like, can really engage and become, consultants internally for the customer. They're a champion.
Andrew Michael: [00:27:33] I know a lot of our listeners are going to love that response. So last question then what's one thing that you know about churn and retention today that you wish you knew when you got started with your career.
Paul Lynch: [00:27:45] That's a really good question. That's so I think
the, I think, okay, so a couple of things here, right? I need to give you one, todd provoking on my side. I've been across [00:28:00] multiple different industries and within those different industries and different kinds of companies inside those industries, the reasons for insurance are different. I'm tempted to say something along the lines of like now understand you got to understand that like when you operate businesses, churn is always.
You know what I mean? So there's always going to be churn in terms of your install base. So you need to set realistic goals and expectations, but I don't really want to say that. What is the one thing that I wish I knew were very true. So I'm going to refer it back into what I said a minute ago, Ryan customer success.
I'm going to say that, net retention rate. CA like you, can't a couple of away from churn. No company wants to turn customers out. Okay. So if you have motions within your client services team that allows you to expand your install base and you're showing growth in it then that's a metric that you should really measure and that'd be if it's growing because you're, you have a strong customer success function That's a key one to measure for me, right?
There are certain like you made a mention earlier like that. There [00:29:00] is going up markets. Okay. If he looks to take a product of markets, there's going to be inevitable churn in that way. Okay, because you're moving your motion. You're moving the support structures that you've had from a pervading perspective.
If I have a product that I'm today on charging $2 on and I then invest $10 million in the product, I make it 10 times better. And I started charging a hundred dollars on, there is an inevitable amount of training that's going to happen there because you're pivoting and moving away. So understand what that revenue, net retention rate looks like as well as your chair.
Is it a right sizing of your budget? Or is it actual Jura? Does that make sense?
Andrew Michael: [00:29:36] absolutely. Yep. Especially when you're making big moves like that, like Netta, MRR retention. It's a really powerful measure to understand like how effective your business is and how effective the engine is that you're building beneath it.
Paul Lynch: [00:29:50] But you could see churn increase exponentially within the same business without businesses install, base, grow exponentially at the same time.
Andrew Michael: [00:29:58] I'm doing better as well [00:30:00] then in terms of profitability and revenue.
Paul Lynch: [00:30:02] Exactly. So if you look just at the churn line and you see it increasing, you can feel that your business is in crisis, but when you take a step back and you look at the net retention rate on the growth of revenue within the install base, and you understand the business is doing well, and this is an adjustment this is a movement and an adjustment in terms of what the business.
Moved away from being a low end and a low end B to C provider within the X, Y Z space. We're now a mid market enterprise provider in the B2B space. And our businesses are far more valuable. Our installed base is growing at a rate that we've never seen before. Yes. Churn is a symptom of this, but this is acceptable churn.
Andrew Michael: [00:30:38] Yeah. So there is such thing as acceptable chain. I think that's a,
no one likes certain customers, but if you're going to make movements in your business, it is an inevitability .
Absolutely. Paul, it's been a pleasure having you on the show today. Thank you so much before we end. Does any final things you want to leave the listeners with any final thoughts or anything that you're up to, or the Chargify team that we should know?
Paul Lynch: [00:30:59] No, you can [00:31:00] find, you gotta find us at www.chargify.com. Our business is a sticky business in that, we're running the center of the stock. We lots of integrations going. If you're looking for a billing and subscription management services where the guys to talk to any takeaways for the listeners, let me go back to what I said.
Let me go back to what I said previously. Don't fixate on, on tactics. By tactics, let's get everyone into contracts and then we'll leave and let's make people pay us anything in advance. And then we'll have the use of the revenue for a longer period of time. Let's get people to pay large upfront costs.
So the guts get on the game. Oh, good things in the world. Strong term mitigation tactics, call it canceled. The counselor, an internet service, it's a tournament, but it's a tactic. Don't get some tied up with the tactics that you lose focus in terms of value creation, more value you create for your customers.
The less likely they are churning and making customers get signed a 61 contract to come on board and then a hate you for the next 59 months. It's not winning. They're going to tell everybody that you signed them up to a 61 contract and making them stay because you were enforcing it [00:32:00] legally. You're going to lose business on the new acquisition side, the checks and balances, as long as you're, as long as you're delivering value to your customer, then you're on the right path.
Not delivering value is not a tactic. Delivering value is why we are, why we're in business. What were you seeking to get what's your customer wants value creation is the greatest way to mitigate churn.
Andrew Michael: [00:32:28] I love that it's like just came to mind. Like the only silver bullet is value and focus on value and you'll make it well, Paul, thanks so much for joining. It's been great chatting to you today and really appreciate wish you best of luck now going forward.
Paul Lynch: [00:32:42] Okay. Thanks Andrew.
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My name is Andrew Michael and I started CHURN.FM, as I was tired of hearing stories about some magical silver bullet that solved churn for company X.
In this podcast, you will hear from founders and subscription economy pros working in product, marketing, customer success, support, and operations roles across different stages of company growth, who are taking a systematic approach to increase retention and engagement within their organizations.