In short, he found out that while the new sales are consistent, and in some cases growing, the churn-up rates and downgrades are getting higher.
And he revealed some practical actions to take to get ready for an eventual market contraction.
There are two main actions to take: survival and lifetime value (LTV).
Let’s start with survival:
- Audit all your expenses: You might be paying for things you’re not using. Cut that cost.
- Make sure you’re “default alive” and have at least 10% margin for error if bootstrapped, and 18+ months of burn-rate if VC-funded. “Default alive” means you don’t spend more than you make, so you are breakeven or profitable.
- Re-evaluate non-core projects.
Lifetime value (LTV)
Now regarding LTV… There are two main areas:
- monetization and
For monetization, the actions to take are:
- Focus on cross-sell: Happy customers consistently buy more during recessions. If you don’t have cross-sells, create an add-on, like priority support.
- Evaluate customer segments. Segments affected more by a market contraction are less likely to buy so you can pull that ad spend.
- Reduce discounts.
- Fix credit card failures to boost your recovery rate.
- Implement cancellation flows to customers that unsubscribe. You can do it with salvage offers or maintenance plans.
- Run promotions to get monthly customers on quarterly and yearly subscriptions.
- Create reactivation campaigns set for 60, 120, and 180 days after a customer cancels the subscription.
Whether you think there will be a recession or not, some of these actions are still useful to boost revenue and cut costs. Hence, something to consider at any time.