Everyone talks about hitting 120%+ NRR these days But the truth is, single-seat users & very small businesses churn at a high rate. Often 3% a month.
Squarespace has 85% NRR, for example. That sort of churn hurts.
But because it’s so high, just doing >better< can have a huge impact. Even modestly decreasing churn in Very Small Business and single seat accounts can have a big impact.
Here are 8 ideas — a few of them fairly basic — on what to do about churn in single-seat accounts:
1. Add Team Accounts if you haven’t already. Most of you do this, but multi-user Team accounts, done right, usually have 100%+ NRR. The account has to provide some real functionality that merits have a mutl-user account. But do it right, and NRR can soar to 100% or higher quickly. More here.
2. Make Your Product More Important. This is a subtle point, but it really works. Make your product more of the nervous system of your smallest customers. Squarespace and Wix added full ecommerce capabilities, making them more than just websites. Bill added more and more payments functionality (mission-critical), and grew NRR to 110% and then 120% even from SMBs. More here.
3. Allow Effortless Downgrades. Many vendors try to lower single-seat and VSB churn by making it harder to cancel. But that’s backward. It’s recurring revenue, so it doesn’t really matter if they cancel now or in 60 days. Once it’s gone, it’s gone. Instead, make it easier to downgrade. Many e-commerce vendors in fact have found this to be very powerful with SMBs. It lowers the barriers to try your product if you know it’s easy to cancel.
4. Raise Prices. This doesn’t always work, but when it does, it works well. Sometimes it’s just not worth charging the tiniest of customers. It’s better to just give them a free edition that works, and say focus your efforts on folks that can pay $30+ a month. Mixmax for example found giving away more of its functionality for free didn’t impact revenue from those customers at all. See also, the next point.
5. Make Free Version Better (Zoom + Slack + Canva). The better your Free version is, the more chances you have for conversions down the road. Canva, Slack, and Zoom give a jaw-dropping amount of their product away for free. Try it. See if in the end, you get at least the same revenue. It likely will decrease churn if customers don’t pay until they really, really need to.
6. Provide Great Support. 95% of vendors just don’t provide any support these days to their smallest customers. They try to use bots and wikis. But talking to a human to solve your problems works. And it’s not as expensive as you think. Imagine you have $1m of self-service revenue with 3% a month churn, annualizing to 40%+. Now imagine you hire 2 support reps for $50k each and churn drops in half. They’ve already more than paid for themselves.  And you are left with more, happier customers to spread the good word.
7. Create a Community. “Community” has almost become trite these days as everyone has figured out that a great one moves the needle. But at least try. It’s one of the best ways to mobile your long tail — and keep them engaged. Do a monthy on-line event. Try a Discord or Slack channel and see if it works. Put up a forum and actually answer the questions. Have frequent webinars where existing customers share how they use the product. Make it authentic, and this almost always works to retain your customers better. And it scales the most when you have lots of tiny ones.
8. Ask Them to Come Back (they aren’t always gone forever). Folks that have been selling to very small businesses and single-seat users know they are often very, very cost sensitive. They may cancel for a quarter and come back later in the year, or even next year when business is better. Don’t treat them all as churned. Treat them as Paused. And keep marketing value to them — and ask for them to come back! Treat them well, and make it easy to leave — and they often will.
Published on August 9, 2021
