Churn Rate versus Dunning Rate

As a fellow female entrepreneur, I know how important it is to stay on top of the metrics that drive our online service-based businesses. Two key performance indicators that you should keep an eye on are churn rate and dunning rate. These metrics will help you understand customer retention and payment failures, which are essential for maintaining a healthy, growing business. So, let's dive into the world of churn and dunning rates, and learn how to use them to make informed decisions for your thriving online empire.

Churn Rate

Churn rate, sometimes called attrition rate, is all about the percentage of customers who stop using your services over a specific time period. It's super important for businesses like ours, where we rely on subscriptions or recurring revenue to keep things moving. A high churn rate can mean that clients are leaving your business quickly, which could be a sign that they're not totally satisfied or that they're not feeling the love from your brand. On the flip side, a low churn rate shows that clients are sticking around, which means you're likely doing something right and your services are resonating with your audience.

Here's how you can calculate your churn rate:

Churn Rate = (Number of customers lost during the time period) / (Number of customers at the beginning of the time period) x 100

For example, if your business starts the month with 100 clients and loses 5 by the end of the month, your churn rate would be:

Churn Rate = (5/100) x 100 = 5%

Dunning rate

Dunning rate refers to the percentage of payment failures that happen within a specific time period. Payment failures can occur for a variety of reasons, like insufficient funds, expired cards, or those pesky bank declines. Dunning rate is a big deal for businesses that count on recurring payments because these failures can lead to involuntary churn. That's when clients lose access to your service even though they didn't mean to cancel.

A high dunning rate means your business is facing a lot of payment failures, which can hurt your cash flow and create some unhappy clients. A low dunning rate shows that most of your clients' payments are going through smoothly, which is great for your bottom line and client satisfaction.

Here's how to work out your dunning rate:

Dunning Rate = (Number of failed payments during the time period) / (Total number of payments attempted during the time period) x 100

For example, if you try to process 100 payments in a month and have 3 failed payments, your dunning rate would be:

Dunning Rate = (3/100) x 100 = 3%

Wrap-up

Understanding churn rate and dunning rate is essential for keeping your clients happy and your revenue flowing. By keeping an eye on these metrics, you can identify areas where you need to improve your client experience, service offerings, and payment processes. Remember, it's all about striking the right balance between retaining clients and attracting new ones, all while continuing to grow your amazing business. You've got this, girl!

If you need help coming up with metrics tailored to your specific business let's chat!