I’m going to admit something that’s very difficult for me and other managed service providers to admit…
At Everon, we lose customers every now and then.
There, I said it. Whew! That’s a big weight off of my chest.
Now that we got that over with, I’d like to consider what an acceptable level of customer churn (turnover, loss, etc.) is in the small business IT support industry. Josh and I have been plotting and planning our growth for the year, and we realized that we can get bit in the butt if we don’t do this correctly.
Assume too low of a level of churn and you hire too quick and end up blowing money on salaried employees you don’t really need.
Assume too high of a number and you may end up providing poor service because you are understaffed.
So what is the right number to use in your planning? I’ve heard that an industry average is close to 20% customer churn - that’s a big number. No wonder it’s hard for businesses to grow past $4 or 5 million in revenue - you need to $1 million per year just to stay even! That’s tough on a small budget.
Here are the numbers I’ve come up with:
- 10-12% churn - for those that are established businesses with great service processes and long client relationships
- 12-17% churn - for those that are running their businesses pretty well, but have occasional lapses in service due to lack of process, fast growth, etc.
- 17-25% churn - for those that are struggling with their growth and/or are very resource constrained; service is average at best
Now, there are exceptions to every rule, so please keep in mind these are just guidelines. And please don’t write me telling me how you’ve never lost a customer…I’ve heard enough of those stories to last a lifetime. Customers come and go - it’s a fact of business. Better to recognize it and prepare for it than put your head in the sand.
I’d be interested in what kinds of numbers other customers see - please let me know.
MRC
