Churning butter will help your business
Welcome to Tuesday Terms, the weekly email where we explain a complicated business topic in easy, plain jane English anyone can understand.
Last week we covered the difference between donkeys and unicorns.
Today we’re going to churn some butter.
No, not that type of churn.
Churn rate, customer attrition, or customer churn all generally mean the same thing. It’s your percentage of customers that fall away over time due to various reasons. Let’s look at an example.
You own a landscaping business that has 10 clients. You mow their lawns once a week every summer until it snows. You come back next spring and 9 of your clients are excited and ready to have you mow again. When you investigate the 10th, you find out your clients sold their house and moved away. This client has churned.
Your churn rate would be 10%.
Let’s get something straight right away. You are going to have some churn. It’s inevitable. People are going to leave your company for another company, people will move away, and sometimes people just die and quit spending money.
It happens.¯\_(ツ)_/¯
The question is, how will your business handle churn?
Will you constantly be finding new clients?
Some businesses like roofing have an almost 100% churn rate. Once you get a roof replaced you don’t need a new roof for the next 15 years.
Will you have a service element to continue receiving money from clients you’ve done work for?
HVAC businesses will install a new furnace and air conditioner, then do their very best to sell you a maintenance agreement. At least once a year they will get a couple hundred dollars from you to come tune up your furnace and air conditioner.
Will you have incentives to keep customers to stay on?
Many landscaping businesses will offer a 50% off spring clean up if the customer commits to a 4 month maintenance contract at the beginning of the season.
In non-tech businesses, churn is not talked about as much as software of technology businesses. Obviously when your business revenue is entirely based off subscriptions like Audible or Netflix, then your churn rate is a big deal.
Churn should be tracked as much as possible in your non-tech business. Keep track of who is coming, who is going, and your efforts to retain clients.
When something is tracked, there is a conscious effort to improve it. When you don’t track analytics then you are leaving it to fate.
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