to improve the churn rate of your agency //

You need to lose clients in order to grow your agency.

This idea may seem crazy, but it has real value.

Understanding the reasons clients leave can help you improve your acquisition and retention strategy.

This article is for agency owners who don’t monitor churn rates.

What is churn? A simple definition

The churn rate is the rate of discontinuation or cancellation by customers or subscribers within a specified period. It is usually expressed as a percent and used to measure attrition.

A high churn indicates that many customers are leaving. This can be detrimental to businesses.

The churn rate should be a North Star KPI for every agency.

It is important to note that repeat purchase rate is not the same as churn. However, when you consider it, it’s like looking at half-empty or half-full glasses (which describes the exact same situation). Because your agency only sells one-time jobs, you shouldn’t ignore it.

Your clients are leaving too early. Are they a significant part of your clientele?

Do not panic if you answer yes to both of these questions. Instead, get going.

You should also ask yourself, how quickly you will need to add clients to achieve your growth goals. You need to get busy if you cannot answer these questions.

Say, for example, that you have 1,000 clients at the beginning but lose 100 over time.

Your growth goal is to have 1,500 clients at the end of next period. Your client acquisition goal is 1,500 – 1,000 + 100 =600 clients.

If your churn rate (100 clients lost), and your acquisition rate (600 clients gained) are both OK, then you will hit your goal. If you lose more than 100 customers, be careful!

People fall into the churn-rate trap way too frequently

To calculate the churn rate, you need to better define your analysis period.

Let’s say, for example, that your typical client stays at your agency for a period of two years. You can also use a reference period of two months to measure churn. Would you trust the churn rate that you have? I certainly would not.

A fixed period (such as a fiscal calendar year) is often a mistake. In order to calculate your churn rates, you should include client lifetime data.

Imagine you are a subscription agency. The longer you keep a client, the more likely it is that they will leave. It’s a natural law. In this sense, all businesses are not created equal.

Do not use the fiscal year as a default. It might be a good idea for your company, but you should first have an idea of the average lifespan of your clients.

If your agency has existed for a while, you will have a good idea of the average lifespan. You can use that period as a reference, and not the fiscal year.

How to calculate the churn rate

You can use this formula if you know the exact figure of your client’s average lifespan:

Churn rate = 1 / average customer lifespan

If the client’s lifespan is unclear (your agency does not have enough data, or you are too young), then I recommend using scenarios. If you want to use scenarios, I recommend them. Use the data that you have already (whether it’s 6 months, 2 years or more) and different retention windows for clients (like 1 year, 2 and 5 years).

You’ll need to use this formula in any case:


Churn Rate = Clients lost during the period of analysis/clients at beginning of same period

It sounds simple. Sounds simple? There are still a few things that can be said about the formula above.

You can calculate how many clients you lost by subtracting the number of clients that you had at the start of the analysis period from the number you had at the end.

You should therefore not include the clients that you have acquired in this same time period.

Let’s take the above example: You started out with 1,000 clients, but lost 100. Your churn is 100/1,000 = 10%.

Yes, you can write the percentages.

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How to calculate churn rates?

The Churn Rate tells you the rate at which your clientele is eroding. If your churn is 10%, it will take 10 analyses to lose all of your clients.

Is 10% great, or is it horrendous? What you do depends on the industry.

Do not compare your agency with others. Your data about your competitors, or those industry averages you find online, is only partially reliable. Most of the time this data is utter garbage. Ignore them.

You want to compare the current agency with your previous agency. Use the last analysis period. This data is 100 percent reliable because you have control over it. ).

You are doing well if your churn is decreasing. If it increases, a warning light should flash in your mind.

It’s then a question of whether you can reverse the course before it is too late. Only you can answer this question (“is the amount of time spent on analysis enough to divert the ship from the iceberg ?”).

You want something that looks similar to this:

Data and methods to improve the churn rate

All agency owners, in general, take the quality of their products and services very seriously. The churn rates and pain points have been identified. This equation is difficult (if not even impossible) to solve at this time.

It is pretty simple. I will share with you our agency’s methodology: tracking client lifecycle events. All of them. If your company is large and has many layers of management, subproducts etc., it can be challenging. This will only add more sand on your wheels.

You can create a dashboard that looks like a funnel when you have the political power to prioritise this data collection. You should be able to visualize the entire client lifecycle, including all of its major steps.

Here’s a simple example to help you get started:

The main problem in this example is that the pain comes after the first business review. What did the client want? Did you ignore her needs or did you just turn a blind-eye?

Maybe it’s because the client was not a good match in the beginning.

You may have changed client teams too frequently and this happens before the anniversary. The list goes on.

You can then identify several areas for improvement. Gather more data and prioritize your efforts.

Top tips to reduce churn rates

All of the things I have mentioned require a lot of resources to make them a reality. Sometimes, all we need is a few quick ideas to get us going. Here are 10 ways to reduce churn:

Have you got a bucket that leaks?

You can measure churn to understand why clients leave and how quickly. You should be able to solve the first challenge easily.

Next, implement a system that will reduce the churn. This system should be available to everyone… but usually HR and product managers are first in line.

Your clients will be so happy with your products and service that they’ll pay more for them and continue to do so. They will become evangelists, and that’s even better!

The post How do you calculate and improve the churn rate of your agency first appeared on Search Engine Land.

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