Churn Bites Episode 7

ChurnBites - Joe Wilkinson Interview

Host: Dan Wilson (ChurnBites)
Guest: Joe Wilkinson (CEO/Founder)

00:00
This company had started out, they'd gone out to market fully annual, it's great for cash flow. What they had not realized is that  it sort of changes your signals that you're getting from your customer. 10, 11, 12 months later,  they started realizing they had a really big churn problem.

00:17
Hey folks, welcome to Churn Bytes. I'm here again with Joe Wilkinson  and today we're going to talk about all about the founder life.  And what should a founder do when they're caught into a spot  where a bunch of people start churning, it's unexpected and they need to fix it.  Joe, how's it going?  It's going well, Dan. How are you doing?  Oh, you know, if I was any better, I'd be twins. Go ahead and introduce yourself for us, please.  Yeah. Hey, I'm Joe Wilkinson.  I run an agency that helps.

00:44
companies increase their conversion, mostly focused on how you can get that conversion in a way that they're going to stick around and keep paying you over the long term. And I've been doing that for a few years at this point. Before that, I really cut my teeth across startups, building, you know, 150 to 700 people up around 100 million. So I've seen every different scale of these company sizes and love helping these different companies now do it in an independent capacity. Well, that experience is a lifesaver.

01:11
You know, the topic today are founders near and dear to our hearts. So set the scene for us. Like, where did you walk into this situation? What was happening on the ground? What was the reality? Yeah. So a lot of these companies, they step back, they hear these different advice on these different places and, you know, a lot of advice. It's always good advice, but it depends on the situation. You want, you need to be able to apply it in the right way with the right lens and the right way of thinking. this company had started out, they'd gone out to market fully annual.

01:40
great for cash flow, it's a great  for when you're bringing in, making sure money's coming in.  And  what they had not realized is that  it sort of changes your signals that you're getting from your customer and what you're building and how to think about it. So  lo and behold,  know, 10, 11, 12 months later, they started realizing they had a really big churn problem.  They thought they had great churn, they thought they had no problems at all.  And these users just, you know, they started leaving.

02:05
This is a nightmare situation for a founder, especially a bootstrap one. But still, mean, the customers that you had that you know  love your baby now are leaving and you don't know why  can be very uncomfortable. So  what happened next?  Well, you have a lot of tough choices,  a lot. And some are easier than others.  One that's pretty radical that  I suggest people try and they went and explored it  is you actually get rid of your annual plan and you go only a monthly.

02:36
Wow, I can hear the gasping in the audience. Tell us more.  Well, it's for exactly that reason.  You know, what happens when you go annual is nobody  really thinks about you. They say, hey, we're getting these new customers. Look at this cash coming in.  Let's go build this thing that looks cool or that thing that looks cool. And you're building all the coolest things.  And when you switch over to monthly,  you these users are leaving right away. So instead of waiting 11, 12 months  to figure out if somebody likes your product or not,  you have four weeks.

03:05
at the most and saying, wow, this person doesn't like it.  And that means your entire company is focused on this. Well, I think I see what you mean. So with the 12 month plan,  the problems are there, but they don't really show up until way later,  possibly long after you can do something about it.  And so your advice here, which is a bit controversial, is to shorten up this feedback loop  from 12 months  to essentially four weeks  a month, basically, so that...

03:34
You know if what you're doing is making a difference or it's not. That is a risky, bold strategy.  So what happened?  Yeah, you're exactly right. And it is risky.  And you need to be able to make sure your business is in a place to handle it and sustain it.  But you start getting these instant feedback. You can look and say, OK, now we know what we need to build. We know which customers are going to turn. Let's go talk to them. Let's go figure out what's happening. Let's build the things that's going to stick them around. Let's have sales  sort of re-engineered to make sure that they're working with them in the right way.

04:04
and you can get your turn to a much, much better place.  imagine that our sales partners would begin freaking out about how are they going to make their quota by playing this game. once again, I can see the value in getting everyone to start focusing on what really matters because it doesn't help to stack the deck full of people that are just going to leave in 12 months.  I that's exactly right. And you don't really want  your sales team selling something  that nobody's going to actually use and they're going to turn anyways.

04:31
So that's a very costly sales process to pay  commission, have someone  build up this big deal that you think is great  and that customer disappears and they're frustrated.  All right, so we've convinced this company,  shorten up your cycle to  month to month deals. It's all you sell.  Everything's really focused now. So what happened? So  their retention went through the roof. They actually honed in on a much...

04:57
more meaningful version of what product market fit is. They figured out who their customer was, they shifted what they're building. And now you're in a good place to actually change, change back and stop switching, doing the monthly thing because you get all these benefits with annual. So then you can say, now we want this cashflow. Now we know the retention is there. In fact, one thing that I think a lot of people don't realize is that first renewal is almost exactly the same whether you're on monthly or annual. So if you're, you know, say keeping 80 % of your customers,

05:27
you'll keep 80 % of your customers 12 months from the line or one month down the road. And so once you feel like that renewal place is in a good spot, you can then shift back to that annual renewal. You know, this would make me nervous, but at the same time, I think there is a benefit of giving the organization a very sharp focus and alignment. And in that respect, it's beautiful. Well, you're exactly right, I mean, that's really the goal of it. It's going to put the company in a very

05:56
Difficult sort of place and this is where you have to know that you can do it financially that you're gonna do it  as a company  and And you're structured the right way  But it's it's there to make people nervous  because you're saying well  people might leave How do we make sure they don't leave? This is the most important problem we can think about because we only have you know four weeks to go fix it every single month we're bringing in these people we have to make sure they stick around  and Man, once you fix that once you fix retention as you know

06:25
That's pretty magical. Business doesn't have to always be comfortable, but it does have to be successful if you want to stay in the game. That's right. That's exactly right. Well, imagine there's someone in the audience that's ready to give this a try and you know they're going to run into some organizational blockers. Do you have any advice for how they might sort of sell this upwards or sideways in their business? There's a couple of different ways to approach it. First is, you know, I like to say, hey, know, some is better than none and more is better than

06:55
And so if you can say, can we take this one channel  and we're going to switch that over only to monthly  or let's just actually introduce a monthly option and see what's happening there and then start driving the focus on  it. Those are two ways that I think are really, really helpful.  Really, really good.  They can still kind of make that same progress. You won't get that same level of urgency. But again, step into it,  show you can kind of do shift over. Maybe you don't have sales sell these monthly deals. Like you said, they might get really, really stressed. But if you have a self-serve channel or another channel,

07:25
or you'd be more comfortable switching to monthly go do that. Yeah, and then you're getting the value out of this shorter term thing without cannibalizing your empowered business. I can see where that would be an easier,  let's call it pill to swallow for  someone.  All right, this makes really good sense. And then how long do you think they should leave it like that? I'm sure the answer is  it depends. But is three months good? Do they need to put it in for a full year?  No, they definitely don't need to do a full year. I mean, the real goal is that you're able to  fix your product.

07:54
get this retention up to a good spot.  So  really the inputs there means that you need to  have enough  cycle time to ship new code. And that depends on your organization, how fast they're shipping, how fast they're making changes.  And then you should be able to see at least one renewal, if not one or two.  And so for really fast moving orgs, three months can be really good.  For  slower moving orgs, maybe you need six, seven months because you can take some time to ship. You're gonna take some time to iterate and adjust.

08:22
Yeah, so whatever does a couple of good, meaningful passes driven by what you learned about these turning customers, then you should see a pretty good difference in your attention. Is that a fair rephrase?  Yeah, that's exactly right. That's phenomenal. OK, Joe, that really helps a lot. And I think while controversial,  it's crazy like a fox. So if anyone's out there and tries this, certainly let us know.  Joe, you have a newsletter. Mind telling us about it?

08:46
Yeah, so you can go to artisangrostrategies.com. You can sign up for my newsletter there or you can go to artisanstrategies.substack.com and access it there as well.  And you can get in touch. You can reply to any of the newsletters or,  you know, click some of the links on the websites. If you do try this out  and  let me know how it goes.  Yeah, that's great. And I  found Joe because I'm a subscriber to his newsletter, so  I can speak for the value of the product.

09:10
It's not AI written garbage, it's practical advice written in a very engaging way and you'll learn something from it.  Joe, thanks for coming by today. We appreciate you.  Yeah, that means a ton to hear you say that and thank you for having me down. It's great.  Great. For this and more episodes, hit us up at churnassassin.com.

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