What is Churn in SaaS? | SaaS Metrics School | The SaaS CFO

📊 Welcome to SaaS Metrics School with Ben Murray! 📊

Greetings, SaaS enthusiasts! Ben Murray is back with another insightful edition of SaaS Metrics School, diving deep into the intricacies of churn metrics. In today's session, Ben sheds light on what churn really means in the world of SaaS, exploring its nuances and impact on retention numbers.

🔍 Understanding Churn in SaaS: Unveiling the Ambiguities

Churn, though seemingly straightforward, can be ambiguous. Ben breaks down the concept into two main types: the classic churn where customers bid farewell and we lose associated revenue, and the less obvious contraction or downgrades, where customers reduce their payment plans. The contraction amount also contributes to the churn metric. So, is it just about customers leaving, or does it encompass contraction too? It's crucial to establish a clear internal definition.

💡 The Timing of Churn Reporting: CFO vs. Customer Success Perspective

One major point of contention is when to count churn in reports. From the CFO's viewpoint, churn is counted the month revenue changes, be it through downgrades or complete departures. However, the customer success team might record churn based on advanced notices, leading to potential discrepancies. Ben highlights the importance of aligning these perspectives for accurate reporting.

📈 Impact on Retention Metrics: The Big Picture

Churn, including both departures and downgrades, significantly influences retention metrics. Ben emphasizes the need for internal clarity to understand the components of the churn number and how they contribute to overall retention figures.

🚀 Key Takeaway: Define Churn Internally for Precision in Reporting

In wrapping up, Ben leaves us with a crucial reminder: whether it's just churn or a combination with contractions, internal clarity on the definition is paramount. Understanding what constitutes churn ensures precision in reporting and, ultimately, a more accurate reflection of your SaaS metrics.

👏 Thanks for Joining SaaS Metrics School Today!

We hope you enjoyed this deep dive into churn metrics with Ben Murray. If you found this information valuable, don't forget to like, share, and subscribe for more SaaS insights. Stay tuned for the next edition of SaaS Metrics School, where we continue to unravel the mysteries of the SaaS world. Until then, keep optimizing those metrics! 📈✨

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[AceCPAsBookkeeping]

TLDR: Churn in SaaS involves the loss of customers and revenue due to cancellations and downgrades, necessitating precise internal definitions to effectively measure retention metrics.

00:00 📉 Churn in SaaS refers to the loss of customers, resulting in a complete loss of associated revenue.
00:26 📉 Churn in SaaS includes both customers completely leaving and those downgrading their subscriptions, impacting overall revenue.
00:58 📉 Churn in SaaS includes both customer departures and revenue downgrades, with CFOs tracking it in the month revenue changes occur.
01:37 📉 Churn in SaaS encompasses both customer cancellations and downgrades, requiring clear internal definitions to accurately reflect retention metrics.