Solving Subscription Churn with Travis Steffen

0:01Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire, the only daily show interviewing the world's top entrepreneurs seven days a week. Today, we'll be breaking down how to solve subscription churn. To drop these value bombs, I brought Travis Stephan into EO Fire Studios. Travis is a serial multi-preneur with eight exits so far, growth mentor at most major SV accelerators, doctoral candidate in business, and focus on quantum. He's also solving subscription churn at Revato.com. In today's information, we'll talk about why subscription retention as the next problem that Travis solved.

0:39We'll talk about mathematically speaking, why churn reduction is actually more important than user acquisition and oh, so much more. And a big thank you for sponsoring today's episode goes to Travis and our sponsors. Are you ready for the ultimate all-in-one platform for entrepreneurs, marketers, coaches, and agencies? Build funnels, automate follow-ups, manage clients, and even white label your own software. Say hello to our featured partner, high level and visit highlevelfire.com to start your free trial today. Fire Nation, is this your year to take your business to the next level? Attend the world's highest rated business growth workshop taught personally by Clay Clark and now featuring football star and entrepreneur Tim Tebow and President Trump's son, Eric Trump at thrivetimeshow.com slash EO fire.

1:31Again, request life-changing tickets today at thrivetimeshow.com slash EO fire. Travis, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. Hey, everybody. Long time, no talk. Something that I believe pretty strongly about becoming successful that most people disagree with is that you should not diversify early. A little bit ironic coming from a serial multi-preneur, but most people are taught to hedge their bets. And sometimes we do that out of fear. What if this thing fails? What if I have to start over? But spreading your energy and your investments or your focus across a bunch of things just in case is a little risky early on.

2:20I believe it's the opposite, especially early on, because becoming successful is very different than remaining successful. Success compounds when you go all in on a single high leverage action. Focus creates that force. I've built and sold a number of different companies. And early on, I did not know this lesson at all. And the last few I have gone completely all in on with extreme tunnel vision and one clear problem for one clear avatar. And those have had exponentially bigger outcomes than any of the early ones, despite the vanity metric beside my name on LinkedIn. So diversification is all about preserving wealth and success.

3:03Focus is how you build it. Focus, follow one course until success. And I love that because if you can create the number one solution to a real problem in a growing industry, you're going to win. And what did Travis do recently? Well, he's solving subscription churn. And there are a lot of problems out there in the world, Travis. What caused you to choose subscription retention as the next problem you wanted to solve? Oddly enough, it wasn't a deliberate process. It was something that I kind of stumbled upon, but should have come up with earlier. After my most recent exit, when we sold GrowFlow in early 2022, I took a little bit of a breather, a little sabbatical from building and started advising founders and executive coaching for certain Silicon Valley folks that were doing really big and important things.

3:54And I kept running into the same story. They were spending tens of thousands, hundreds of thousands, millions a month on ads, on promotion, on branding, partnerships, building products. And they were obsessed with new people into the top of the funnel, but they were almost all of them without exception were quietly bleeding customers out of the bottom. And one founder in particular was scaling incredibly fast, but the churn was killing their LTV. It was as if he was trying to bail water out of a sinking boat. And he knew that in order to stop long enough to plug the leak, too much water would get in and the boat would sink.

4:35And he was in this impossible position. So I started to think to myself, how could I find a way to solve a problem like this for clients and for customers who are all trying to change the world? And that's all they know how to do is their subject matter and building product, talking to people about how awesome it is, but in terms of actually figuring out why people don't use as much, why people are leaving, why their bills fail, things like that. That was a problem that was so common, no matter what type of company it was. And it just so happened that, you know, a friend of mine, former client of mine who had just had a recent exit, had built something, his name's Jordan, and he had built something that was very, very early.

5:17It wasn't even a product yet. He was just validating the concept. And it happened to be in that space. And he approached me and said, do you want to do this together? And I took a look at the attraction he had made with just Zapier and Google Sheets. And I said, absolutely, let's do it. And that's how the company was born. Now let's talk numbers because mathematically speaking, why is churn reduction actually more important than user acquisition? Because it seems like all we ever hear is lead generation, user acquisition, like keep bringing people to the top of your funnel, how would you respond?

5:49I would say that, I mean, first and foremost, it's definitely not me that is inventing this. And I want everyone to know that it's the best growth minds in the world that can do simple math. And sometimes actually it's very complicated math to go through and figure out what your most important growth metric is. Brian Balfour of HubSpot and Reforge fame calls retention the power plant of all growth metrics. And I pretty much listen to, there are a couple of people who I listen to everything they say. Brian is one of them, Naval, Sean Ellis, all of those guys, I'll pretty much listen to whatever they say.

6:24And if your bucket has a hole in it, at the end of the day, pouring more water in just delays the inevitable. Mathematically, every single percent reduction in churn increases your customer lifetime value significantly and your ability to afford more acquisition, your ability to afford more engineering or service work that you can use to make a better customer experience. So it's this compounding effect. More importantly, the cost of saving an existing customer is often 10 times lower than the cost of acquiring a new one. If you're ignoring churn and you think it's fine, we'll worry about it later, you're not scaling, you're just spinning your wheels.

7:03And realistically, every single company, no matter how big or small, they have this point in time that mathematically it's just called a carrying capacity. No matter what your churn is, no matter what your acquisition rate is, there is going to be a maximum number of people that you can support based on that churn rate. And if you don't know what that number is, you might be doing great one month and completely plateaued the next and nothing changed. And the only difference is you've reached that mathematical carrying capacity. So from my perspective, you don't hit this with customer acquisition.

7:37You can always expand your avatars. You can always expand into new products or new depths of products or tweak monetization. But if you cannot keep your customers, you cannot grow. So let's do a deep dive because I think a lot of people understand to some degree what churn means, but really break down what solving churn means. That is a fantastic question. So early on at Revato, we asked ourselves the question, what do we want to become? Can anyone really solve churn? And we just asked ourselves, it's a hypothetical. If one were to solve, quote unquote, churn, what would that look like? Because realistically, churn is not one problem.

8:16It's actually a cluster of root causes. Involuntary churn happens when maybe a credit card fails or a transaction doesn't go through. And by the way, there are over 2000 unique bank error codes that could cause a car to not go through. And most people just assume that, you know, maybe you don't have enough money or maybe something else happened. And that's not the case. And sometimes it's no one's fault except for there was a bank service outage. So involuntary churn just by itself, meaning people don't pay, that has over 2000 reasons why it happens. voluntary churn, the reason people decide to leave is far more complex, far more complex than just 2000 reasons.

8:53It happens when your product doesn't deliver ongoing value or the perception is that your product doesn't deliver ongoing value, even if it is. Some users cancel because they're confused. Maybe they got poor support. Maybe they have outgrown you. Maybe they have new people coming onto their team that know different tools better than yours. Solving churn, in air quotes again, means diagnosing each root cause, building systems to automatically catch them as early as possible, maybe predict them in advance, and then create a set of actions that happen as a result to ensure that that outcome is far less likely.

9:29I mean, Fire Nation, I hope that you're thinking about how could this help my business? How could this help my day-to-day? Like what actions am I taking or maybe more importantly, not taking that really could be costing me on a day-to-day week to week, month to month basis. And we have a lot more to talk about around this topic when we get back from thanking our sponsors. Hiring new team members can be incredibly time consuming. And when all you wish you had is more time, sorting through resumes and trying to get in touch with potential candidates is the last thing you want on your to-do list.

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11:51Become the next success story. Schedule a free consultation and request tickets to join football star and entrepreneur Tim Tebow and President Trump's son Eric Trump at Clay Clark's next business conference today at thrivetimeshow.com slash EO fire. One of my favorite places to visit during the summer is my hometown in Maine. My parents have a beautiful home on a small lake, and it's one of the most peaceful places I know. The wailing of loons, kids laughing while tubing around in the warm sunshine, peeking through the trees. Now to make trips like this happen every year we work really hard. Running a business from the road isn't always easy, but location independence has always been a high priority of ours.

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13:06Travis, we're back and I want to talk about today. How do subscription-based business owners measure churn and what do they typically do when they have that information? It's a fantastic question. We have found firsthand that many legitimate, like growing, successful, eight-figure businesses aren't tracking it, which is the biggest surprise in the world when we see it. But oftentimes they have the tiger by the tail, so to speak, and they're moving as fast as they can to build and acquire and sell. They don't think about it until it's an emergency. But the people who are are often tracking a simple percentage and maybe that they compare that to benchmarks that they found on the Internet on, you know, first round capitals blog or somebody like that.

13:52They might be tracking just monthly churn rate or annual churn rate. And maybe they segmented a little bit. Maybe they were even a little bit more advanced and they use cohort analysis. But that's like watching your weight go up without knowing if it's fat or muscle or what you have done differently to create that new outcome so you can repeat it. It's all a lagging indicator. At best, they're going to send maybe a brief win back email or try to charge a failed card again, or God forbid they stay on Stripe Dunning or something like that that just sends three emails in sequence over three days and then gives up.

14:28Very few people have predictive insights. Almost no one has preemptive processes or are able to actually take action as a result. And because there are so many variables there, people are treating, you know, if you if you treat churn like a multi pronged behavioral pattern that requires deep targeted personalized interventions, that's when you can start to make a difference in your metrics. And the problem is most companies that have done this are gigantic. They have data scientists on staff. They have a huge team that are able to execute a lot of these things manually and it becomes very expensive.

15:04And that's what we wanted to create for basically everyone. We have customers at Revato that have maybe$5 ,000 in monthly recurring revenue, and their subscriptions are$8 a month. We also have people that are doing millions a month in revenue, and their average subscription is$5 ,000 to$8 ,000 a month. All of them don't want to focus on this because it is very complicated. It's really frustrating. It's probably the most deflating thing that founders can see. We've even had founders lately who have asked us, I don't want to see anything about churn. I want you guys to handle it. I want to see a report at the end of the month.

15:40So we actually have to pull back on our comms because it's so psychologically damaging to their day to day. And that's not the norm, but we have had people request that. So what they typically do is they just tell their team, hey, we're losing customers. Let's see if we can ask a few of them why. And then they make their best guess and do the things. that is about as far as most companies go ever. And I think that that's just a huge problem that we can solve. Well, you just shared what most people do when they find out that there's some churn happening. And let's say that the listeners are running a subscription-based business and they're looking to reduce their churn rate.

16:19What's the first thing they should do in your opinion? Yeah, but the first thing they should do, first and foremost, what gets measured, gets managed. Building some sort of infrastructure to predict and prevent churn right away is too advanced for the average company to try to build on their own. First things first, talk to your customers, as many of them as possible, even if you have to give them a little something for their time, because most of them are busy. Talk to them and try to understand. It is much more important than having one more sales call or two more sales calls per day to be able to configure you're offering and morph and shape around how people receive it.

17:02Because oftentimes, it's not even what you're doing. It's how your customers feel about what you're doing or how they believe you're doing. The perceived value that you're creating is far more important than the actual value. In many cases, for one client, we just told them, hey, articulate your ROI for the customer on their main dashboard. If you have that data behind the scenes, why not display it so they can see that they're making a positive ROI investment on your product. Just that one change slashed churn for them by 40 % overnight because people actually saw that what they were getting was more valuable than what they were paying for it.

17:39So that one thing I would say is a huge difference maker. But if you want to go a little bit more advanced, then Revato and other tools like it are going to be definitely the way to go, especially services like ours where we're not charging you a flat fee per month. You're not taking any risk. We only charge a commission on anything we save. That commission drops off after the month that we saved it. So you're always positive ROI, at least four times positive ROI because it's a 20 % commission. So what are you doing that's fundamentally different than other companies, other competitors to combat churn?

18:16It sounds like maybe the no flat fee could be one thing that some companies are doing that you're not. But what are some other fundamental differences? A big one is we're doing everything for the founders. We are a SaaS platform, but rather than a self-serve SaaS platform where you have to deploy your own resources on training your team and having them run it and building everything and testing it and trying it themselves while they're juggling every other task. You have seasoned experts that do this across dozens and dozens and dozens of customers, saving hundreds of thousands of dollars in churn every single day.

18:48Our team knows what works. And our AI behind the scenes also knows even better what works. Now, we also have a very human approach to communicating with customers. And we do that as an agent of the client. So they believe it's your team that is communicating with them. And what that does is ensures AI never reaches your customers ever. It's always human touches. All of our AI is behind the scenes. And then the the nitty gritty of what we do is, you know, we we segment and we predict and we enrich data. So we don't treat all cancellations or all customers the same. They're all unique. Everyone is incredibly unique.

19:30So we we enrich data behind the scenes to figure out what's important for each individual subscriber you have. And we cater all of their flows according to who they are and why they use you. And if they do cancel, we have information that most people don't have on why they're leaving and when they're leaving and what you can do about it. Because in some cases, months after they leave, we'll actually reach out as an agent of like hired by the client. We basically say, hey, now for the first time, this is us at Rivado. The client has hired us to determine why you left. Be as brutally honest as you want.

20:03So we actually get the truth. Most people will try to avoid confrontation on their way out the door. They just want to cancel. So they won't give you the truth. They'll give you what you want to hear. And we want the truth so that our clients can do things about it. Once you know the pattern of the almost infinite number of reasons why people are leaving, we then prioritize those things. And we ensure that you're doing the number one thing at any given time that could prevent your customers from going out the door. So using your time more efficiently is a huge, huge part of what we do. But just focusing just to go back, circle back to that very first question you asked me of not hedging.

20:44Right. This is all we do. We just do churn reduction. We're not trying to become a massive suite of disparate products, serving clients of all kinds and with all types of problems. All we do is we want to be the best and the most helpful churn reduction company on earth. And that's our focus. That is our mission in life. I mean, Fire Nation, you work so hard to get a customer. You should be working hard or at least having somebody who is working hard to keep that customer, to reduce that churn. and there's a lot of low hanging fruits. You just got to find out what are the causes that are causing people to leave.

21:21Maybe there's a couple screws you can tighten left and right that are going to make a big difference. So Travis, one key takeaway for the entire conversation that we had for the listeners. And then what is your call to action for Fire Nation if they want to learn more about you and Revato? One key takeaway, do less, better. Go deeper, don't go wider. choose one thing, do it better than anyone else in the world and make sure that that one thing is a problem that a very specific group of people who you know how to find need solved. And then my call to action, head over to Revato, R-V-A-T-T-O dot com slash E-O-F and book a demo.

22:05We can get you onboarded in 15 minutes and that's about the longest you'll have to focus on Revato for the duration of your business. You will get$1 ,000 in commission-free recoveries to give it a shot and try it. And if it doesn't work, then you can go back to your old system. Fire Nation, become the number one solution to a real problem in a growing industry. Because you're the average of the five people you spend the most time with. You've been hanging out with TS and JLD today, so keep up the heat. And for links to everything we talked about, visit eofire.com, type Travis in the search bar, and the show notes page will pop right up and Travis, thank you for sharing your truth, your knowledge, your value with Fire Nation.

22:44For that, we salute you and we'll catch you on the flip side. Hey, Fire Nation, a huge thank you to our sponsors and Travis for sponsoring today's episode and Fire Nation, are you an entrepreneur on fire who's looking to share your amazing message with the world? If yes, we are now accepting applications for EO Fire. To learn more about entrepreneurs on fire and becoming a guest, visit eofire.com slash guest. I'll catch you there or on the flip side. Are you ready for the ultimate all-in-one platform for entrepreneurs, marketers, coaches, and agencies? Build funnels, automate follow-ups, manage clients, and even white label your own software.

23:24Say hello to our featured partner, High Level, and visit highlevelfire.com to start your free trial today. Fire Nation, is this your year to take your business to the next level? Attend the world's highest rated business growth workshop taught personally by Clay Clark and now featuring football star and entrepreneur Tim Tebow and President Trump's son, Eric Trump at Thrivetimeshow.com slash EOfire. Again, request life-changing tickets today at Thrivetimeshow.com slash EOfire.