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- Escaping the Churn Plateau
Hey y’all — how do you get your startup’s growth out of a rut?
I was catching up with a founder I’d invested in and he mentioned how they’d been stuck in the $50-60K MRR range for ~2 months.
To a founder, that feels like forever.
We dug into what was happening and, this week, I want to share (an anonymized version of) how we dug into the problem, the surprising root cause, and how to solve it.
It might be helpful for you too.
Getting Your Startup Out of a Rut
The Problem
After half a year of consistent 20-30% monthly MRR growth, the startup hit a plateau due to churn.
Many founders don’t realize this plateau exist until they hit it.
When you’re just starting out, a little churn doesn’t seem so bad.
Yeah, you’ll add an offer to your cancellation flow and message the customer to learn why they churned, but you’d rather focus on bringing in more revenue via new customers.
It feels ok to do this when things are working — you want to keep the momentum going. A lower growth rate = bad.
But as you grow, even if your churn rate stays consistent, it becomes a larger raw amount of money that you need to replace each month.
Image from ChartMogul (ignore that it’s in years)
10% of $5,000 is only $500 of new user growth you need to add per month, but 10% of $50,000 is $5,000 — just to stay at the same MRR level.
You can see how this gets challenging. You only have so much time to sell, and so much budget to invest in marketing.
So — churn is the problem. Right?
As we dug into the conversation, I realized churn actually wasn’t the root cause — hiring too quickly was. Let me explain…
PS — I’m opening up 2 (paid) monthly consulting slots for the summer.
In the past I’ve helped founders:
- Raise millions from VCs and angels
- Grow revenue via referrals, content marketing, and cold email
- Navigate a tricky acquisition process
Reply to this email to let me know what your goals would be if we worked together.
The Cause
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