Growth is key, but so is retention
Growth is key, but so is retention
"Up and to the right" is the exciting stuff, but you need maintenance too
Everyone loves to see, report on, and discuss “up and to the right” metrics. Founders are expected to find a path to each revenue and growth milestone without any hiccups. Unfortunately, that’s not how GTM works. Most lose sight of the most impactful cohort of their business: their existing customers. Growth should remain the priority, but you must ensure your customers love your product, communicate shortcomings (trust me, they exist!), and advocate for your renewal when the time comes. If you know the above, you may be able to accelerate upsells (faster than you think).
One piece of advice I often see is asking your customers, “Why did you buy, and what were you hoping to accomplish?” If you are asking this after the purchase, you’re already behind. This is not a best practice for a startup at the early stages. This advice is more suited for a new leader or account owner at a scaled organization where the data about the customer is scattered or you’re seeking clarification on specific topics that need further validation.
In the spirit of this post, we’ll assume you know the following about your customer. If not, you know where to start before the rest of this post is relevant!
What does the customer do? – What is their business model, and how do we impact it?
Most obsess over “ICP,” but don’t think about why your solution matters to their company. If you are an AI company, you should know how your model allows their business to do something mission-critical. Otherwise, why would they stay next year?
Why did they buy from you compared to their alternatives?
Why this matters: Aside from the obvious reasons, you should assume that even after winning the deal against a competitor, the competitor isn’t going to relent. No competitor? Someone will come after you eventually (including the disgruntled user who thinks they can build an alternative)
Why did they buy now instead of later?
Why this matters: “Compelling event” or “urgency” is usually the sales meme that justifies a purchase. That said, if the customer needed it for something this year, but it was a one-off case, do you have a clear line of sight on how you’ll retain this customer next year?
What was the deal value ($)?
Why this matters: Did they underbuy or overbuy? Not sure? You want to make sure, at the very least, you can retain the revenue that is equivalent to the perceived value at purchase. Otherwise, you’re going to be in a tough spot come renewal time
Who signed the agreement?
Why this matters: You should always know who signed the contract. Most of the time, people think they know, but I’d encourage you to review each of the contracts your customers have signed in the past 12 months and check if you have a relationship with each signer. Remember, you are the CEO. The executive who signs is your peer.
Who owns the account on a daily basis?
Why this matters: You need to know who is going to request the budget next year. Additionally, you want to be careful about what happens if this person leaves. Do you have anyone else who is an advocate? Often, you’ll hear the recommendations of “champion development” and “multi-threading.” This is why it matters post-purchase as much as it matters pre-purchase.
What we see often is that Founders have an “oh shit” moment when they realize a renewal is coming sooner than they realize. Timing and bandwidth is difficult, but I promise trying to find another customer in place of a churned one is far more painful than proactive management.
On a more positive note, some Founders are still in survival mode worried about winning customers, forgetting how much better their product has improved over the past 3+ months. They’re too close to the day-to-day of building and are pleasantly surprised when they try to position upsells.
How do you know when you’re in retention mode or growth mode? Start with this frame of reference. If you can’t fill this out confidently, start reviewing with your team how you can start to gather this information for each customer. We encourage you first prioritize renewals in the next 90 days, but over time you should be able to review each customer with this level of detail on a weekly basis:
Customer
Name of Customer
Who we are working with
Renewal Date
Prioritize annual contracts, if you are still an MRR-driven business, prioritize the companies that matter most to you from dollar amount and “logo value” (ie your lighthouse accounts)
Deal Amount
Straightforward
Customer Health
Prioritize product adoption and active usage as the most important metric
Are people using as expected?
Have there been complaints or walls being hit in slack?
Happy or unhappy customer?
Do they use the product for what was discussed pre-purchase?
Recommendation: Use PostHog, LogRocket, or something similar to monitor usage and actual sessions to ensure customers are using the product as intended. You can typically catch potential issues you would have missed without a phone call or asking specific questions.
Likelihood of renewal
If their contract renewal were today, how confident are you they would renew?
Upsell potential?
Are they using all of your features?
Are they using your service a ton but “underpaying?” This is super common, talk about it amongst your co-founders and/or leadership team and put together a plan to discuss upsell plans with a customer. You’ll be surprised by what you can come up with :)
Technical Blockers/Risks
Your product isn’t perfect (It’s fine if your product isn’t perfect!!). But you should know where the customer has expectations or requirements in order to get more value or meet their expectations in order to renew. This should be your main obsession and balance on where time allocation goes in regards to your product roadmap. You can also leverage this to identify “is this a good customer for us based on what they expect and what we can deliver?”
Contractual Blockers/Risks
Some customers share their contractual concerns (usage, cost, etc.). Have you gotten ahead of any potential concerns?
Do you have access to the person who owns the product? The signer?
Is there a new signer this upcoming year?
Do you have buy-in from all the relevant stakeholders?
Next Steps
Have someone own the next steps and touchpoints with each customer based on the topics above. Share the ownership amongst the team vs. shouldering it all yourself. Make this a team sport! Helpful resources include Mutual Action Plans and Close Plans (these apply to post-sales efforts too)
The above will help you have a much more productive revenue-focused conversation about your customers. Your Engineering and Product leadership teams may already talk about some of the technical needs and capabilities, but this allows you to have a more holistic view of what will impact your revenue streams on a consistent basis.