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Why Marketers Should Understand B2B SaaS Churn Rates

Contributed by Sonny Sultani

Software as a Service (SaaS) companies provide an invaluable offering. Clients can access beneficial internet applications without the complexity and bandwidth limitations of having to download and manage expensive software. It’s becoming such a popular tool that SaaS applications make up over 70% of total company software use. Of course, the only way for these businesses to thrive is to ensure that acquisition numbers exceed B2B SaaS churn rates.

Every subscription-based company must be aware of B2B SaaS churn rates to secure their overall success and longevity. Keeping an eye on how many people terminate their subscriptions gives marketers important insight into current performance and revenue growth forecasting. SaaS churn rates tell a powerful story about what aspect of the customer experience is failing and what changes you need to make to attract new prospects and retain current customers. As a result, it’s an effective tool for enhancing your digital marketing efforts.

Gain a comprehensive understanding of B2B SaaS churn rates, how to calculate them, and how they impact acquisition and market positioning for continued success.

“SaaS churn rates tell a powerful story about what aspect of the customer experience is failing and what changes you need to make to attract new prospects and retain current customers.”

What Exactly is SaaS Churn Rate?

SaaS churn rate (also known as attrition) is the rate at which customers cancel their subscriptions during a certain amount of time. While an occasional loss may not seem impactful in the big picture of your business plan, if left unchecked, B2B SaaS churn rates can ultimately destroy your business. After all, if you’re not doing anything to retain the customers you acquire, there’s no way for you to stay afloat, let alone grow and expand.

Churn rate doesn’t just reflect lost revenue. It also means you’re spending more on customer acquisition, which can cost up to five times more than customer retention. Keep a close eye on high SaaS churn rates because they can be detrimental to your bottom line.

Types of SaaS Churn Rates

There are essentially two main types of SaaS churn rates:

Customer level: A customer completely ends their relationship with your brand.
Subscription level: A customer remains with you but changes the level of their subscription.

Factors that Affect B2B SaaS Churn Rates

With either type, several factors can impact SaaS churn rates, including:

Seasonality: Churn rates may increase or decrease at certain times of the year.
Growth initiatives: If you launch an acquisition campaign, new members could skew data.
Demographics: Some people may simply be a better fit for your services than others.
Subscription level: Lower-tier services tend to have a higher churn rate than higher tiers.
Contract type: Short-term contracts may have higher termination rates than long-term subscriptions.

You can track factors to look for trends and patterns that enable you to plan your marketing efforts accordingly. Meanwhile, other factors that impact churn rates are customer-based and often unpredictable, including:

Financial issues: Customers can no longer afford their subscriptions.
Changed needs: Your product no longer meets the customer’s needs.
Poor customer experience: If someone has a negative experience, they’re likely to terminate their subscription.

Track all of these factors to identify areas of improvement that are in your control and what changes to make to attract new prospects, maintain happy customers, and reduce SaaS churn rates.

“Churn rate doesn’t just reflect lost revenue; it also means you’re spending more on customer acquisition, which can cost up to five times more than customer retention.”

How to Calculate Churn Rate for SaaS

Because there are so many variables that can affect its outcome, B2B SaaS churn rates can be a complex concept. However, it’s a fairly easy figure to calculate. First, you’ll need to determine the amount of time you want to evaluate (monthly or annually). Then, you’ll need to identify the total number of customers you had at the beginning of that time and the total number of customers you lost in that amount of time. Those numbers will then work into the SaaS churn rate formula as follows:

(Lost Customers / Total Customers at the Start of Time Period) x 100 = Churn Rate

Let’s say you’re wanting to determine your monthly churn rate. If your business had 300 customers at the start of the month and you lost 20 by the end, you would divide 20 by 300. Then, you would multiply that answer (.07) by 100, for a total of a 7% monthly churn rate.

(20 / 300) x 100 = 7%

To keep track of your churn rates, you can maintain a spreadsheet with these figures, or you could simplify the calculating and tracking of your SaaS churn rates with a tool like ProfitWell. This cloud-based app delivers your subscription and financial metrics on one dashboard and can help optimize your pricing and reduce cancellations for lower churn rate.

The goal, of course, is to have the lowest churn rate possible. An acceptable average SaaS churn rate is typically anywhere from 2% to 8%. Anything higher than that could have a significant impact on your monthly recurring revenue.

Churn rate calculations are most beneficial when conducted over a longer timeframe. Short-term results on a daily or weekly basis won’t reveal much insight. But quarterly or annual churn can reveal far-reaching trends and yearly performance. You can see whether your marketing strategy is working and the efficacy of customer retention efforts.

Churn Rate Visibility Improves Acquisition Efforts

SaaS churn rates impact every aspect of your business. They provide the information you need to:

Improve customer service: If customers are leaving due to a negative experience, you can re-evaluate your customer service efforts.
Rethink customer onboarding: Create a new, smoother, more user-friendly onboarding process that makes customers excited to be new subscribers.
Provide better training: When teams don’t silo information and sales and support staff are on the same page, your company can provide a better experience for customers.
Seek feedback: At key points along the customer journey, you can check in and see what you could do better to satisfy your current customers.
Build deeper relationships: Connect with your customers on a more personal level and build relationships that last.
Incentivize current customers: Discount offers and giveaways can entice customers to stay.

Churn rates allow you to learn critical information about ways to improve your approach and current systems to better serve your customers, provide a more personalized experience, and encourage customer loyalty. This is important because 65% of a company’s business comes from existing customers.

B2B SaaS churn rates are especially important to marketers. By tracking churn rates and understanding customer behavior, you can adjust your business processes and marketing approach to improve the acquisition of qualified deals with higher customer lifetime value (CLV). A KPI for every SaaS company, CLV is the average amount of money you can expect to earn from one customer throughout the duration of their relationship with your brand. The greater the CLV, the more profitable the customer.

Knowing CLV helps you assess your marketing efforts and provides insight into important KPIs that help you plan current and future marketing strategies for optimal results. It gives you a better idea about your company’s overall profitability and can help you discover ways to increase ROI while decreasing customer acquisition costs. Even just knowing customer lifetime (how long a customer will be with your company) can be an asset. Use churn rate to calculate your customer lifetime as follows:

Customer Lifetime = 1 / Churn Rate

If your churn rate is 7%, then your customer lifetime is 1 / .07 = 14.28 months (or a little over one year). Understanding how long you have with your customer helps you plan an effective marketing strategy to not only make the most of the time you have with them, but to also create a retention strategy that entices them to maintain their subscription even longer.

“Churn rates allow you to learn critical information about ways to improve your approach and current systems to better serve your customers, provide a more personalized experience, and encourage customer loyalty.“

Implement a CRM for Marketing Insights

One of the best ways to combat high B2B SaaS churn rates is to focus on retention through customer relationship management (CRM). A growing industry valued at $69.31 billion, CRM is software that helps you manage all relationships and engagement with prospective and current customers. CRM systems like HubSpot can help you make deeper connections with your audience, streamline operations and processes, and improve revenue generation.

Ultimately, CRM systems help you track your customer’s experience throughout their journey. CRM provides invaluable data that helps you identify areas of high churn and gives clues as to what caused it. Through CRM, you can:

Maintain open communication: Customers can give you invaluable feedback to shape your marketing efforts.
Understand your customers: Learn the needs, expectations, and preferences of your audience.
Channel people through the sales funnel: A better experience helps convert customers.

You also gain access to original advertising sources and can review messaging, channels, and placement to see what about your message didn’t resonate with your audience. You can review bounce rates, click-through rates, and overall engagement to determine which ads yielded high conversions and which ones fell flat.

Conversely, you can compare high churn ads with low churn ads to determine what aspects of your campaign are performing well and what edits you can make to improve overall performance. All of this gives you the information you need to make necessary adjustments and course corrections to ensure your marketing efforts are effective, impactful, and successful.

How Churn Rates Help You Understand Market Positioning

Churn accounts help you understand a lot about market positioning and messaging. Looking at lost accounts can show you why customers canceled their subscriptions and, even more, whether they left you for a competitor. If customers are choosing competing brands over yours, you know you need to take action to secure better market positioning.

Exit surveys can tell you why people left your company, providing you with an opportunity to make intentional and purposeful changes that help set you apart from your competition. You may need to review your price point, assess your customer service, or come up with innovative ideas to reimagine your products and services to better meet evolving consumer needs.

This data can also let you know whether your messaging is resonating with your audience. Wording, tone of voice, and technical explanations may not be connecting with your customers. You might not be adequately presenting the benefits of your services, so customers aren’t seeing the full value of your offerings. In this way, churn rates can help you educate clients about best use cases, so they have the confidence they need to subscribe to your services.

Churn rate also helps you gain an understanding of your customer base. You can learn purchase behavior, habits, and see common reasons for purchases and terminations. All of this helps you qualify potential clients and target the people most likely to benefit from your offerings. Targeting the right audience ensures higher success rates and lower churn rates, resulting in more revenue and continued growth.

“Churn rates can help you qualify potential clients and target the people most likely to benefit from your offerings.”

Reduce Your B2B SaaS Churn Rates

Churn rates provide invaluable metrics that can shape your business operations and marketing strategies for better customer acquisition, higher retention, and greater revenue generation. Behind the Work provides digital marketing solutions for B2B SaaS clients that attract quality leads and help grow your organization. Enhance your digital marketing strategy with data from B2B SaaS churn rates to boost your overall performance.

Visit Behind the Work today to learn more about how we can help SaaS churn rates.

What is RevOps? A Revenue Operations Guide

Contributed by Sonny Sultani

Revenue Operations is something that has become increasingly popular in the business world in recent years. However, understanding Revenue Operations, or RevOps, can sometimes feel overwhelming. This Revenue Operations guide will help you explore many of the ins and outs of RevOps.

In today’s high-demand market, 78% of customers expect consistent interactions from all business departments, according to Salesforce. However, 59% of customers say each department feels unique instead of one cohesive company.

Revenue Operations works to overcome that disconnect and deliver a seamless experience for all customers no matter which departments they interact with.

Read through this guide to see if RevOps is right for you and learn how to implement it into your business strategy.

What Is RevOps?

Revenue Operations (RevOps) is the alignment of sales, marketing, and operations to maximize revenue potential. RevOps fully integrates customer retention, the marketing funnel, and sales processes so that each organization has the same goals and uses unified data.

“RevOps fully integrates customer retention, the marketing funnel, and sales processes so that each organization has the same goals and uses unified data.”

It includes nearly every business operation like identifying revenue leaks, reevaluating prices, and detecting at-risk customers.

In the end, the goal of RevOps is to increase business revenue and build better relationships with customers.

Consider implementing RevOps when:

Your sales team is struggling to close deals
Your marketing team is losing qualified leads
Your operations team is performing at a snail’s pace

How to Implement RevOps

1. Audit the Customer Journey

The primary goal of RevOps is to provide a cohesive experience for your customers. Auditing the customer journey is the first step toward a unified vision. You are looking for any disconnects between departments.

Examine your existing customer-facing content and make sure it aligns with the buyer’s journey. Plan to fill in any content gaps.
Audit your CRM technology for your sales, marketing, and customer service departments to ensure they are tracking all customer interactions.
Assess your website and other digital channels to eliminate any barriers for potential buyers.

2. Define and Align Customer Stages

Create goals and definitions for each stage of the customer journey. Make sure each team understands and agrees with these definitions and goals.

Evaluate your analytical process to make sure you are collecting the right customer information at each point in the sale pipeline.
Examine your tech stack to look for redundancies or gaps in your tools and software.
Give all teams guidelines for your new streamlined RevOps procedures. This should include sales, content marketing, and the customer experience.

3. Build a RevOps Foundation

Once you have identified problem areas and created new definitions, you can start building a solid foundation for your new Revenue Operations processes.

You should create:

A plan for customer acquisition that focuses on meeting or exceeding client expectations.
Streamlined workflows that collect accurate data and move prospects quickly through the sales pipeline.
Automated task queues that include follow-up emails and other customer touchpoints.
A RevOps dashboard that identifies current customer bottlenecks.

4. Optimize Your RevOps Strategy

Once you put your Revenue Operations strategy into place, the work is still not finished. You will need to continually adjust and optimize your processes as your business grows.

Create a routine RevOps meeting schedule to ensure alignment across all departments. Make sure all department heads recognize their roles in contributing to the growth and success of your RevOps plan.
Analyze your RevOps dashboard each month to identify which phase of the customer journey needs the most attention.

What Makes RevOps an Ideal Business Solution

RevOps is an ideal business solution because it gives each department within a company the same goal – to create a cohesive customer experience that ultimately leads to higher revenues.

“RevOps is an ideal business solution because it gives each department within a company the same goal – to create a cohesive customer experience that ultimately leads to higher revenues.”

There are a few key benefits that make RevOps an easy business decision:

Predictable Growth: Knowing what to expect can make a big difference in the success of your business. A solid RevOps process can give you more predictable growth. This can help you feel more confident in making certain business decisions, such as investing in new markets or creating new products.
More Transparency: In many business meetings, each department is focused on its specialty and individual goals without understanding what the other teams are doing. This can cause competition and friction between teams, especially if problems arise. With a RevOps program, your teams have complete visibility among each other. Each team sees the same big picture, and this creates a seamless transition from one team to the next.
Better Collaboration: With a unified goal and more transparency, your teams are more likely to work together. RevOps helps promote healthy collaboration and reduces infighting since all departments are working towards the same goal.
Improved Customer Retention: With a solid RevOps plan in place, each department has access to the same data. This means when they interact with customers it creates a seamless experience no matter where in the pipeline that customer is. This smooth customer journey will naturally lead to improved customer retention and higher revenue.

Revenue Operations Team Structure

In your business, each department likely has its own manager and possibly even a high-level executive. While all these team leaders are part of the revenue operations strategy, it is a good idea to create a new position or team that can oversee the transition with an unbiased eye.

1. Hire a Solid Generalist

In the new role of revenue operations manager or revenue operations vice president, it is a good idea to start with a single person. You can either choose a new hire or promote an existing employee with a strong understanding of your business structure.

You need someone who is comfortable working with all your departments and doesn’t favor one department over another. This means you need a solid generalist.

A RevOps specialist should be familiar with and able to learn a wide range of technical programs. They will need to analyze data and have a good understanding of what that data means. This person also needs a growth mindset and must be willing to try new things. Permit them to experiment, create new processes, and fail.

“A RevOps specialist should be familiar with and able to learn a wide range of technical programs. They will need to analyze data and have a good understanding of what that data means. This person also needs a growth mindset and must be willing to try new things. Permit them to experiment, create new processes, and fail.”

As a final consideration, your new revenue operations specialist should have a strong personality that can convince department heads and general staff that change is a good thing.

2. Grow Your RevOps Team

As your RevOps plan starts to take shape, you will likely need to expand the team. Your RevOps manager or vice president will need a team of specialists to help guide the adjustments for each department. There are numerous revenue operations job roles available.

Sales Ops: The Sales Ops manager on the RevOps team is primarily responsible for the CRM system. They will choose what data gets included and collected in the CRM. They will also work directly with the sales representative to train them and determine their quotas. As part of the RevOps team, they will help standardize sales processes and customer materials.
Marketing Ops: A Marketing Ops manager will be focused on marketing data. They will track information like pipeline, revenue, and leads. They will also work through marketing attribution to try to determine which marketing channels are performing the best. Working with RevOps, the Marketing Ops team will determine how many leads are needed to achieve revenue goals each period.
Customer Success Ops: A Customer Success (CS) Ops manager documents the customer journey and what it takes to improve customer support. They will work to improve workflow efficiency to help keep customers happy. As part of the RevOps team, they will handle customer health scoring and forecasting.
Ops Analysts: If your RevOps team continues to grow, you might need additional RevOps Analysts. These will be people who specialize in data analytics and spend their time working with your tools and software. Many of these analysts will be SQL or BI specialists who are experts in collecting data.

3. Create a Unified Data Stream

The goal of any RevOps team is to create a single stream of unified data. You can accomplish this primarily through a CRM system. However, you can use other business intelligence (BI) tools to help you visualize the data.

Your Ops Analysts can create RevOps dashboards for each department and position. This will help each person in the company visualize his or her role in the overall RevOps mission.

Once created, your unified data stream will take constant upkeep. Your teams will continue to evolve, processes will change, and your products will improve – all these changes will require continual maintenance. However, the return will be well worth the investment.

4. Give Your RevOps Team the Power They Need

Knowing what needs to be done and having the power to do it go hand in hand. When you create your RevOps team, make sure you give them the power and authority they need to act.

“Knowing what needs to be done and having the power to do it go hand in hand. When you create your RevOps team, make sure you give them the power and authority they need to act.“

If they are limited to handing over a proposal to other team leaders, the plan will likely fail. The head of RevOps needs to have as much, or more, decision-making power as the heads of other departments.

Revenue Operations vs Sales Operations

While the term revenue operations is relatively new, most business executives are familiar with the term sales operations. This can lead to some confusion in thinking that revenue operations is just a new term for what they already know.

Instead, you can think of sales operations as a part of revenue operations. Sales ops is primarily concerned with the company’s sales, while RevOps is focused on the entire customer journey.

For example, a sales operations specialist might be responsible for training sales staff, creating lead scoring models, and helping sales reps hit their quotas.

A RevOps specialist, on the other hand, will focus on connecting sales with marketing and other general business operations so that every department is working together on the same goals. When working as a single team, each department will create more opportunities for revenue growth.

What to Look for in a RevOps Vendor

Choosing the right RevOps vendor can have a huge impact on how successful your RevOps program will be.

A good RevOps vendor should exhibit these four characteristics:

Provide trustworthy automation and data: You want a RevOps solution that gives you automated data in real-time, so you always know the information you have is up to date. It should automatically gather data from sources like your CRM, calendar, email, and other business systems.
Offer deep revenue insights: You want a RevOps solution that goes beyond surface-level information to give you new insights. With these deep insights, you can uncover customer pitfalls and bottlenecks that are slowing down your revenue stream.
Have reliable performance: With a RevOps solution that gives you reliable performance and data month after month, you can spend more time focused on achieving your goals instead of digging through data for the answers you need.
Deliver predictable revenue: A good RevOps solution will help you reliably predict what your revenue will look like in the future. When you can trust that information, it gives you the freedom to explore new business opportunities. Perhaps you want to expand into a new market or introduce a new product?

Revenue Operations Resources

If you want to learn even more about RevOps, there are numerous revenue operations books and revenue operations courses available. Here is a quick snapshot of what you can choose from.

Revenue Operations: A New Way to Align Sales & Marketing, Monetize Data, and Ignite Growth

In this book, written by Stephen G. Diorio and Chris K. Hummel, they explore what it takes to grow a business in the 21st century. They look at the practical steps you can take to align your teams and unlock more revenue potential. It includes real case studies from across numerous industries and offers a step-by-step approach to connecting your departmental infrastructure.

The Revenue Acceleration Playbook: Creating an Authentic Buyer Journey Across Sales, Marketing, and Customer Success

If you are ready to accelerate your sales, start making connections. That is the idea that author, Brent Keltner, presents in his book. He focuses on helping businesses create a more personalized and connected experience for their customers. He includes more than 20 real-life examples of businesses creating authentic customer journeys and increasing their sales.

Revenue Operations Courses

If you want to become a RevOps expert or make your resume more appealing for a future revenue operations role, consider these revenue operations courses.

Revenue Operations Certification: Hubspot offers a free RevOps certification class. It offers a solid foundation in basic revenue operations principles. It takes about 5 hours to complete this course.
Unleashing ROI: Offered by the RevOps Co-op, this 10-week course is designed to help you grow a career in revenue operations. It includes live instruction, permanent access to the course materials, a chat group with your cohort, and peer-reviewed work.
Revenue Growth Architecture School: Offered by Pavilion, the goal of this class is to teach business professionals how to design and achieve sustainable growth. It is free to Pavilion Associate and Executive members and lasts for two weeks.

Explore the Revenue Operations Guide with Behind the Work

At Behind the Work, we believe in offering companies a predictable revenue flow. Revenue Operations is an essential part of that process. We aim to deliver a seamless Revenue Operations process that can help promote transparency and teamwork.

If this revenue operations guide has piqued your interest, we can help you improve your revenue flow.

Ready to take the next step in your Revenue Operations journey? Contact Behind the Work today to get started.