Do you know your anti-hero?

In any good story, there’s a hero and an anti-hero. In SaaS startups, the hero is growth, and the often-overlooked anti-hero is churn.

Churn measures how many users cancel their subscriptions within a given period - typically monthly, if you operate on monthly subscriptions. It’s the exact opposite of retention, which tracks how many subscribers stay with you each month. As Brian Balfour pointed out, “if you have poor retention, nothing else matters.”

Wondercraft operates between the Consumer and SMB markets. For this segment, a good monthly churn rate is below 8%, and excellent is below 5%. For example, Dropbox has a 4% monthly churn, and Slack is at 6%. [source]

The situation is different for startups, particularly in the AI space. Synthesia, targeting SMB to Enterprise, has a churn rate well over 10%, whereas ideally it should be below 5%.

As you might expect from this post, churn is a top concern for me as well. At Wondercraft, our current churn rate is 19%, which is quite high. However, we have a solid plan to address it, which I’ll share below. (Noting that this is only for self serve customers. Our Enterprise churn rate is less than 2%)

Churn is a rite of passage for every founder as a startup moves from infancy to the early stages. It’s almost a privilege because facing churn indicates you’ve achieved growth and have paying users.

However, churn is much less discussed compared to growth. It’s less interesting, and there are no “churn consultants”. In this post, I’ll share how to combat churn and what we’ve implemented at Wondercraft.

Julian’s message above marked the beginning of my journey prioritise lowering our churn over anything.

After a few months of studying this area, these seem to be the core pillars you should examine before making any changes:

1. PMF (Product-Market Fit)

   You likely started with a small number of core ICP (Ideal Customer Profile) customers who had strong retention over time. If you don’t have any customers with strong retention, focus on achieving PMF first. For more on PMF, check out the past newsletter.

2. ICP (Ideal Customer Profile)

   You’re probably acquiring a variety of customers, some of whom don’t have the problem you’re solving at a critical level, don’t need it frequently, or have better alternatives for their specific situations. Narrowing your ICP is essential. Track acquisition, activation, and retention specifically for your ICP instead of using overall averages.

3. Natural Frequency

   Determine the natural frequency of the need you address for your ICP. If this frequency is lower than your subscription renewal period, you’ll face challenges. If it’s reasonably high, assess what percentage you’re capturing versus other solutions and understand why.

4. Activation

   Improving activation is usually the primary way to enhance retention for your ICP. I define activation broadly as the process from signup to setup, reaching the aha moment, and establishing a habit.

A lot of this ^ is advice from Ely Lerner - that sent me down a rabbit-hole. Thanks Ely.

In summary: The real work to address churn and retention starts at the earliest interactions users have with your brand and product, closely tied to PMF and activation.

Based on these four pillars, here are 10 concrete actions we’re implementing at Wondercraft that you might find useful for your business.

1. Speak to a lot more users.

Every new subscriber receives an invite for a one-on-one onboarding session with me. Additionally, any user who enters the cancellation flow is offered a refund if they join a call with me. These conversations have two objectives:

a) Understand what users intended to do (aids in PMF and ICP evaluation)
b) Help, activate, and onboard them, as our platform has become feature-rich and complex, making it difficult for users to find what they need.

This is the most important part, so systematize it by tracking conversations and identifying patterns.

(Superhuman does this too)

2. New Signup Flow

The goal here is to help users understand how to use the platform better. Additionally, we introduced a side objective: enabling users to reach the aha moment faster.

3. New Drip Campaigns

Three of them actually: one for when users sign up, one when they subscribe, and one when they cancel. The goal for each is the same—invite users to schedule time with me, encourage them to explore our onboarding guides, and learn from how others succeeded with Wondercraft.

4. Incentivize Users to Choose Annual Plans

We previously offered a 10% discount on annual plans—now it’s 30%. This doesn’t directly impact PMF, ICP, or Activation, but it does buy us more time to engage with users and demonstrate value.

Technically, this comes at the cost of a 20% growth slowdown. However, that’s not entirely the case, as some users may find the lower price more accessible and see it as a good ROI deal. So, while there may be some revenue trade-off, the long-term benefits could outweigh it.

5. Improve Our Training Content

Create a new structured flow for training users. Leverage videos, podcasts, documentation, and in-app training. Build a YouTube playlist with all training content and offer a reward for completion. This should help improve activation.

6. Set Up Slack Notifications for Cancellations

This makes churn feel more real and prompts immediate action. It’s also easy to set up—just connect Stripe to Slack via webhooks.

Other Things We Are Doing but Haven’t Implemented Yet:

7. Fundamental Product Changes – Adjust Pricing

User feedback has made it clear that our pricing structure is both confusing and often leaves them disappointed. So, we’re changing it.

8. Fundamental Product Changes – New Capabilities

We’re introducing a new feature that significantly expands what users can do. This directly impacts PMF and ICP. We’re investing substantial development time to enter a new space that addresses a bigger challenge for our ICP and strengthens our alignment with them.

9. Create the Best In-App Onboarding

As we scale, one-on-one calls will increasingly become infeasible. Beyond helping users reach the aha moment faster (which improves conversion), it’s crucial that they understand how to use the platform effectively. This may require an additional onboarding step after subscription.

10. Create a Streak/Reward Program

Inspired by Duolingo’s playbook—where maintaining a streak was a key driver of success. If your product benefits from consistency (like language learning or, in our case, content creation), build a habit-forming mechanism that encourages users to stay engaged.

To sum up: do everything you can to talk to more users. This will help you understand where you stand with PMF, refine your ICP, and improve activation.

And by the way, this post from Lenny is a fantastic resource if you want to dive deeper.

And be patient—these changes will likely be fundamental to your business and will take time to show results.

Go kill that anti-hero,

Dimi

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Hot tip - listen to this playlist to enter the Wonder zone.