In 2023, market conditions are pushing the shrewdest founders to focus on one metric above all else: retention. Everyone knows retention is important to startup success, but this becomes especially critical when capital is scarcer. You can no longer afford to grow by acquiring users that don’t stick.
Why not? Well first, your cost of capital has gone up…by a lot. That venture money for buying those ads and hiring salespeople, is more expensive, i.e. dilutive, to you now. Second, CAC is higher because conversion rates are lower. When there’s less money available and the money you do have doesn’t get you as many new users as it used to, you need a different strategy.
Even those clever founders who have battened down the hatches to focus on retention this year have won only half the battle, because retention is a tricky, nuanced topic. I screwed this up badly as a founder. Made every mistake in the book. I see those same mistakes repeated by founders far cleverer than me, year after year. So here are 7 common mistakes and pitfalls that even experienced founders make, but that can be deadly during these times of pricey capital.
This problem occurs when a subscriber buys an annual plan, churns after 2 weeks never to be seen again, and is counted as “retained” for the next 11 months because technically their subscription is still active and the credit card billing hasn’t been shut off yet. Here, you’re looking at payment retention.