Been running a bootstrapped ed-tech B2C SaaS startup since January 2023, started charging in April. We’ve been growing in revenue around 9-15% MoM but our churn is ridiculous, it’s around 21% and has been flat there for around 2 months (was previously 30-25%). Our growth in other metrics is great, we’ll hit $10k MRR this month but that churn number frightens me and I don’t know what I can do about it.
We are a freemium site and around 2% of our users are returning users (this lines up pretty much exactly with our conversion rate from free to paid accounts). Currently have around 125k users total, of which around 4k have paid for something and 1.7k have active subscriptions.
My guess, which has already been alluded to by you and other posters, is that students are using this for a specific project and when that’s over, they don’t need it anymore. That’s the beauty (to consumers) of SaaS products. I subscribe and cancel in a month for SaaS products frequently when I have a one-time need.
I would do two things:
(1) Start some experiments where you offer people something to those cancelling. Maybe it’s a free month of premium, or maybe it’s something like they get a month (or some months) of premium if they refer someone else who signs up. Do a bunch of A/B tests and see the impacts those have on MRR and renewal rates.
(2) You’re successful with students and getting traction there - that’s excellent! However, students are only one potential customer segment. I would really brainstorm and see how I could target people who perpetually need.
For example, I’d think that certain researchers, scientists, and doctors would ideally like a constant feed of new research pertaining to their field. You could probably add a feature for them (if you don’t have it), where they save a search term, and anytime new research related to that subject happens, your product does its thing and lets the customer know.
I think by staying with just one segment, you’re always going to have this issue (especially with students who are cash-strapped/conscious).
Find other segments (target markets) that:
- aren’t as cash strapped (if people do it as a part of their profession, they’ll probably have work pay for it)
- perpetually need research
- are slammed for time
Don’t give up on students, but expand your use cases and target market to new segments.
Sounds like you are better than 99% of start ups out there.
That’s catastrophic and unsustainable, you should just give it to me.
Kidding aside, you may be inviting the wrong customers into your store.
I would hit pause and spend time understanding your paying users- who are they, what they use your product for, and what value they get from it.
After you understand your ideal customers, you can market to them more directly (landing page language, ads, etc) and improve your overall metrics.
Out of curiosity, how did you get your initial set of users? And how did you get to 125k users so quickly?
Primarily google search and ads
Use AI to summarize scientific articles in seconds
Send a document, get a summary. It’s that easy.
Sounds useless TBH. This is a paid service to offer something research papers already have on their first page. It’s surprising people are stupid enough to pay for it in the first place.
70% of the stripe responses when cancelling are “I don’t need it anymore”
That sounds about right.
125k users signed up and nearly 300k papers uploaded says otherwise
Congrats on growing to $10k MRR! Despite the churn, that’s still awesome.
Churn could just be a fact of life for your product. Until you identify another use case, it sounds as though your core customer is a student (cash constrained) who has a need for a particular class (time constrained).
You could consider a different pricing model. Pay a one time fee for access for X months. That may help you earn more revenue per customer. Or offer them a “pause” feature - for something like 10-20% of the normal monthly price, they can keep their account active and have some feature access between the freemium and the paid subscription.
Otherwise marketing will have to be a priority. The good news is that new students show up every single month.
Still I think what you’ve achieved is no small feat. You can try to optimize, but also just try to recognize that churn may be one of the battles that your business model will have to fight.
I think you know more about finance and business than you give yourself credit. Most businesses are ‘keep doing what brings in the dough’ if 16 year olds are making money through ecomerce I think you’re fine. Keep at it
DM’d you
Having looked at your product, my guess is they may be one-shot users. They need the premium tier for one or two things, then nothing.
To validate, 1) how many actions do churned users take prior to churning? and 2) how many churned users return to the platform?
That high churn means you’re not meeting customer expectations. Talk to the customers who stayed and those that didn’t
Recovering churned clients is on of the most cost effective customer acquisition channels you can find.
I don’t think you’re doing so well since 21% MOM means people are cancelling after they figure out you expectations are met and those that stayed probably just forgot to remove the subscription since in 5 months they’re all gone
Maybe it’s because people use your product when they have a paper / project due, and then want to mitigate their spending by canceling.
Consider testing out various pricing models that are more flexible so that people aren’t tempted to cancel. Or better yet, up the feature offering so they feel like the cost of canceling (making them “lose” something) is much greater than the monetary cost of walking away.
I agree with most of them here. I think that one thing you needed to do is talk to your users. Hear their thoughts, and stuff you needed to improve. That’s one of the skill entrepreneur should have. Check more here https://www.cuppa.so/post/8-skills-every-entrepreneur-should-have
I’m a bootstrapped edtech startup too, if you want to chat. I have about 6 products in the market doing just under $0.5M ARR.
Read through all the comments here and there is a lot of food for thought.
My suggestion is to focus on the 3% that are active users. Those are your customers. This high churn rate as others summarized means you have two cohorts of customers.
Group 1: one time hit. Need it. Found it. Used it. Moved on. Package this as a $50 for 50 hours or something. Whatever the bounds are. And use that to gain usage and exercise the saas.
Group 2: repeat, active users. Go talk to them. Who are they? What we’re they doing before you came along? What if you shut down tomorrow?
The group 2 customers are your market. The others are your testers.
Good luck!
Diagnose. Not every product has to be a use it for life type product as long as the lifetime customer value is positive and healthy.
You can try churn prevention strategies. You can do a referral system or credits for free time or other incentives. Push heavily for yearly premium subscribition and gate features behind that.
Or you can look at wider feature set that keeps people on. Sounds like you solve a one a year or once a career problem.