Business owners and marketers in SaaS-based businesses spend a tremendous amount of time on lead-generation. As an agency partner, sometimes it seems that’s all they focus on—the top of the funnel and the velocity at which you can drive prospects into it.
Yes, improving your performance on your CPC (cost per conversion) or your CPA (cost per acquisition) is a critical piece of your business case. However, gaining revenue—particularly if you’re focused on scale—is not nearly as important as keeping your revenue.
The quantum economics of SaaS
If you want a quick schooling in every metric under the sun and a healthy dose of the acronyms at play in SaaS, you may want to read this 64-page PDF summary by KPMG. It’s a few years old (July of 2017) but still does a tremendous job of highlighting the travails of keeping subscription-based customers in the boat in pursuit of the almighty lifetime customer value.
The KPMG summary approaches subscription business as a sort of numbers game where at all times you are trying to accelerate the number of new customers in while decelerating the amount that go out. With so many variables moving around, SaaS founders and enterprise-level subscription-based businesses struggle to know which measure can have the most significant impact on growth moment to moment.
What would it be worth if you could stop 30% of your churn?
Guy Marion, the founder and CEO of Brightback wants to draw the attention of SaaS leaders to “churn”—some SaaS businesses hit early churn rates of 30% to 60%.
Marion had more than theoretical experience with the problem, having worked in the SaaS space in Silicon Valley. It was during his stint as an entrepreneur in residence at Matrix Partners that he honed in on the unmet needs of both B2B and B2C subscription businesses.
Brightback, launching broadly today—and already at work with companies like Copper and Crazy Egg—claims to be the first customer retention automation software for subscription businesses. Marion says, “There is gold in stopping your customer from clicking the cancel button.”
Investors like solutions to big problems with big dollars attached to them
What does all this “stoppable” churn equate to? According to some estimates, subscription-based businesses will grow to between $300 Billion and $500 Billion in revenue by 2023. Even at an “acceptable” churn rate of 10%, the scope of the churn problem is $30 Billion in lost revenue and up to $60 Billion.
A problem that large is the kind of thing investors dream about. When Marion emerged from an incubator in January of 2018, it took only a few months to raise Seed capital. Brightback was able to raise $2 Million in May of 2018, with Point Nine Capital as the lead, joined by Matrix Partners, Foundation Capital, Rembrandt Venture Partners, and several syndicates.
Just three months later, they completed their Series A with lead investors Index Ventures, and additional investments from Point Nine Capital, Matrix Partners, and Rembrandt Venture Partners.
Add to that a bank line of credit with Silicon Valley Bank and this company a little over one-year-old has raised total investments of $11 Million. It may sound like a lot in just over a year, but it’s a small percentage of that $30 Billion+ churn market.
Others have sized the churn, and now Brightback wants to size the solution
Marion refers to the RedPoint Free Trial Survey that highlights the early churn problem. It may be low based on his experience. Marion has personally spoken to 200 CEO, CMOs, VPs of Growth, and CROs who have suggested a churn rate of 30%-50% is not unheard of in the first 90 days. Moreover, whether you’re interested in the B2B or B2C economy, the problems are equally daunting.
What kind of difference could Brightback make? Marion says, “I believe if you go all in, most companies can reduce their churn by an average of 30%, but a plan to reduce churn by 10% in the first year is a great start.”
One of his customers, the CRO of a well-known pre-IPO CRM wants to use the Brightback solution as a lever to protect low-hanging revenue fruit. Marion has helped them build an ROI calculator.
Together they have laser-targeted the point of cancellation—a measurable customer event—and currently (although results are early) Brightback is showing a 14% save rate. Map that “save rate” across the annual incidences of customer cancellation and this CRO can project an 800%+ 12-month return on implementing Brightback.
Subscription-based world meet Brightback
In addition to the public launch of the Brightback website, Marion is appearing later this week at the Toronto Growth Marketing Conference. With him will be Suneet Bhatt, the GM of Crazy Egg who will address the idea of “Retention as the new acquisition.”
As subscription-based businesses take hold of the earth, solutions like Brightback will become more critical. Marion hopes to redefine the basic math of SaaS and subscriptions—stopping the low expectations of churn and starting the higher expectations of retention. He’s got the early investment to do that.
Now, you just need to sign up with Brightback…and not cancel.
