Dear SaaStr: We Have More Than 20% Churn Our First Month. What Should We Do?
This is pretty common in the prosumer space and especially in mobile subscription apps. And even where you don’t see 20% churn the first month with SMBs, it often lurks, because most B2B apps in SaaS don’t even get 80% of their SMBs activation the first month.
This is a classic onboarding and activation problem.
Here’s where I’d focus:
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Fix Onboarding Immediately. This is usually Job #1: That first-month churn screams that customers aren’t getting value fast enough. You need to optimize your onboarding process to drive activation within the first 7 days. And really if possible the same day. Make sure every customer is fully set up and using the product ASAP. If they don’t see value quickly, they’ll churn before they even give you a chance. Tools like Intercom or Pendo can help guide users through onboarding flows, but you also need a strong customer success team to handhold new users if necessary.
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Segment Your Churn: Break down your churn by customer type. Are certain segments churning more than others? For example, are smaller customers or specific industries dropping off faster? If so, you may need to refine your ICP (Ideal Customer Profile) and focus on acquiring customers who are more likely to stick around.
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Push Annual Plans: Monthly plans are killing you. Customers who commit to annual plans churn far less because they’ve already paid upfront. Offer aggressive discounts or incentives to get new customers onto annual or at least quarterly plans. This can double or triple your LTV (Lifetime Value) overnight.
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Improve Early Engagement: Beyond onboarding, what are customers doing in the first 30 days? Identify the key actions that correlate with retention (e.g., uploading data, inviting team members, completing a setup checklist) and make sure every customer hits those milestones. If they don’t, they’re at risk of churning.
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Offer a Salvage Plan: For customers who try to cancel in the first month, offer a “save” option—maybe an extended free trial, a discount, or a personal onboarding session. Sometimes, churn happens because customers don’t fully understand the value of your product yet.
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Analyze Your Value Prop: If churn is this high, it’s worth asking: are you solving a critical enough problem? If your product isn’t mission-critical, customers will drop off the moment they hit a budget crunch or don’t see immediate ROI. You may need to refine your messaging or even your product to better align with customer pain points.
If you can cut that first-month churn in half, your growth trajectory will change dramatically.
