3 ms·

> If you've got a 5% monthly churn rate then at 1000 customers you'll lose 50 customers/month. At 2000 customers you'll be losing 100 customers/month - and all

> If you've got a 5% monthly churn rate then at 1000 customers you'll lose 50 customers/month. At 2000 customers you'll be losing 100 customers/month - and all of a sudden your 100 new customers a month will net out to zero. After that point you'll start losing customers. Actually, in this scenario the number of users will asymptotically grow towards growth/churn = 100/0.05 = 2000 in perpetuity. So it's not a "death sentence" but will lead to growth stagnation.

ig1 8y ago
Yes. Plenty of SaaS businesses (both bootstrapped and VC financed) end up flatlining. How sustainable this is depends on what space you're in, generally if you're revenue flat you become much more vulnerable to external factors (competitors coming into market, CAC increasing, recession, etc).
- T2_t2 8y ago
  This is just a weird concept. Sure, not growing is risky in the existential, everything is risky sense. Profitability makes that far less scary. The biggest cost for most SAAS business is salaries. If times get tough, letting people go is always an option, and if a company makes a 30% margin - which $1.5M and 500K profit is almost exactly - that means the non-salary costs likely need to grow by a few thousand percent before there is a profit pinch. I'd take $500K profit and control over loss making and hope. But that's just my personal risk profile.
  - ig1 8y ago
    Revenue can collapse fast in SaaS if you don't have churn under control. Let's say there's a downturn (for economic or competition) reasons and new user acquisition falls to 80/month and churn goes upto 7%. You're now losing 60 customers/month. In three months you'll be down 10% on revenue and your costs will likely be the same. This isn't a VC funded vs bootstrapped issue, it's a fundamental dynamic of the subscription mode - I've seen plenty of VC funded startups struggle with the same challenges. Living on the edge where your best efforts only net out churn is hard. Everything becomes harder from recruiting to sales. It's super demotivational to a sales and marketing team when their best effort essentially nets out to zero.

ig1 8y ago

Yes. Plenty of SaaS businesses (both bootstrapped and VC financed) end up flatlining. How sustainable this is depends on what space you're in, generally if you're revenue flat you become much more vulnerable to external factors (competitors coming into market, CAC increasing, recession, etc).

T2_t2 8y ago
This is just a weird concept. Sure, not growing is risky in the existential, everything is risky sense. Profitability makes that far less scary. The biggest cost for most SAAS business is salaries. If times get tough, letting people go is always an option, and if a company makes a 30% margin - which $1.5M and 500K profit is almost exactly - that means the non-salary costs likely need to grow by a few thousand percent before there is a profit pinch. I'd take $500K profit and control over loss making and hope. But that's just my personal risk profile.
- ig1 8y ago
  Revenue can collapse fast in SaaS if you don't have churn under control. Let's say there's a downturn (for economic or competition) reasons and new user acquisition falls to 80/month and churn goes upto 7%. You're now losing 60 customers/month. In three months you'll be down 10% on revenue and your costs will likely be the same. This isn't a VC funded vs bootstrapped issue, it's a fundamental dynamic of the subscription mode - I've seen plenty of VC funded startups struggle with the same challenges. Living on the edge where your best efforts only net out churn is hard. Everything becomes harder from recruiting to sales. It's super demotivational to a sales and marketing team when their best effort essentially nets out to zero.