Ask any B2C SaaS founder what metric they’d like to improve and most will say reducing churn. However, proactively reducing churn is a difficult task.

I’ll outline the approach we’ve taken at Jenni AI to go from ~17% to 9% churn over the past year. We are still a work in progress but hopefully you’ll find something useful.

What is churn?

In SaaS businesses, churn refers to the rate at which customers leave service over a specific period, typically expressed as a percentage. We can breakdown churn into specific categories:

• Customer churn: the number of customers leaving every month
• Revenue churn: the amount of recurring revenue lost due to customers cancelling
• Net churn: the amount of recurring revenue lost minus expansion revenue gained

If you are early stage SaaS it is likely customer churn and revenue churn are roughly the same, assuming one product and one price point.

Why churn matters

In the early days (e.g., $1K MRR), high churn is easy to outrun by acquiring more users or improving conversion. As revenue grows, high churn becomes debilitating.

The traditional wisdom (emphasized by YC) is to avoid marketing until you’ve iterated to a product users will stick with. Adding to and polishing a core product that isn’t good enough can hinder pivoting to a product or market that is a winner.

However, recently I’ve noticed a shift away from this approach, especially for LLM-powered products where data volume is crucial. Some founders attempt to iterate through product-market fit while simultaneously pouring users into the funnel.

Carrying capacity

Carrying capacity or stagnation point is when new revenue = churning revenue creating a state of equilibrium.

David tweeted about our carrying capacity prophecy which played out in September 2024. I still remember the cold sweat on my brown when sitting in a cafe crunching our numbers and arriving at ~$550k MRR plateau.

To further illustrate this point of carrying capacity, let’s consider a fictional SaaS business with the following metrics:

• $100,000 MRR
• 20% monthly churn
• $10 ARPU (average revenue per user)

With 20% monthly churn, it’s losing $20,000 in MRR each month ($100,000 × 20%).

To maintain current revenue level ($100,000 MRR), it would need to acquire 2,000 new users every month just to replace the ones who leave.

Month	Starting MRR	Churned MRR	New MRR Needed	Ending MRR
1	$100,000	$20,000	$20,000	$100,000
2	$100,000	$20,000	$20,000	$100,000
3	$100,000	$20,000	$20,000	$100,000

This startup is trapped on a treadmill, acquiring 2,000 new users monthly just to stand still.

Improving churn

Low churn is the downstream result of a product that delivers value (time, money, status) exceeding what users pay for it. Low churn, therefore, is an indicator of product market fit.

Churn reduction advice usually falls into two categories:

• Tactical fixes that make it harder to leave
  • Mask the true problem
  • Easy to achieve
  • Might work in the short run
• Strategic improvements that increase product value
  • Address the root cause
  • Difficult to execute
  • Create sustainable retention

Good ‘ole Goodhart

Before discussing approaches to reduce churn, it is worth mentioning Goodhart’s Law. Goodhart’s Law teaches us that ‘when a measure becomes a target, it ceases to be a good measure.’ In other words, don’t become obsessed with manipulating the number.

When teams focus exclusively on reducing churn percentage rather than improving product value, they often resort to superficial tactics like making cancellation difficult. This approach backfires.

Second-order benefits of reducing churn

Beyond the obvious revenue retention, lower churn creates powerful second-order effects:

• Community building becomes possible with stable user cohorts
• Committed users provide more valuable feedback
• Higher LTV allows for increased acquisition spending
• Team morale increases
• Improved company valuation (VCs prize low-churn businesses)
• More predictable revenue forecasting

Our approach at Jenni

Here is the framework that has helped us focus on the right things.

1. Clearly understand the exact user profile you are serving. This underpins every subsequent point
2. Talk to the right users
   • Only address pain points experienced by your ideal users. It requires discipline to ignore feature requests from poor-fit users but it is crucial. Focus on decoding stated versus revealed preferences. Users rarely know exactly what they want—it’s your job to interpret their problems and design solutions
3. Within your ideal users workflow, target frequent pain points
   • If your product solves a high pain, low frequency problem then expect high churn and re-activation (users cancelling and coming back in x months). This may not be a problem per se, what is a problem is that you need to compete with competitors (both existing and new) every single time the user is ready to buy a solution. Economic profits in the long run trend to zero
4. The root cause of churn in most businesses is the price/ value trade-off is not working for a user. Finding the leading actions to retentive behavior is the best way to reverse engineer onboarding. Be proactive about helping users maximise value from the product
5. Log and categorize churn reasons. Understand the user’s mindset at the moment of cancellation through exit surveys and follow-up conversations

Remember, sustainable churn reduction comes from building a product that consistently delivers value to well-defined users.