Client Churn: What is normal?
Mike and Josh are doing their growth plan for 2008 and they are wondering about churn in the MSP space. What is normal? Mike suggests that, “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.” He goes on to detail his churn estimates:
- 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
Here at Architel we lose, on average, one client per quarter and just before New Years on average we lose two more ~ less than 6% churn rate. On the other side of the coin we gain three to four clients per month on average ($6K average revenue per client).
