How To Control Burn And Churn Rate

Burn and Churn rate are things that people tend to overlook in the rush to gain customers/topline, but at what cost? Fundamentally both areas are aimed at keeping your costs or rather bottom line in order

I will first talk about keeping the ‘burn rate” under control, which is essentially the amount of money you spend every month to keep your company running. Take a keen look at your staff costs, look at options of taking on interns. Taking on permanent staff can be tricky as you are committed to paying salaries for work that can be done in more efficient ways. It may be helpful to outsource work to third party freelancers/agencies to keep costs under control as well, since you only pay till you need the work to be done.

Likewise, consider limiting the use of tailor made software and subscriptions only to the extent that they are necessary. A lot of work can be done using off the shelf material at a fraction of the cost. Infrastructure costs for physical office space can be kept minimal as well by encouraging people to work from home and hot desking for the staff can also help in keeping fixed costs in check. Events for staff motivation need not be conducted at fancy places, the idea is to keep the morale high and also have a good time which can often be done in a very simple manner.

Churn rate is quite different to burn rate as the former refers to the speed at which you are losing your customers i.e. they are not coming back to you for a repeat purchase/experience. While it is very difficult and rare to come across a zero churn rate, what you need to do is keep an eye on it so you can delve into the reasons why people are not coming back to you.

A good idea is to be in touch with the front line and also look at opportunities for direct consumer interaction. These interactions prove to be great feedback avenues into understanding what people are really looking for. These could be areas for you to explore if there is something you can do to plug the gap. Equally take an honest view on your areas of development and focus on your key competitive advantage.

It is vital that you also focus on retaining your consumers and creating “sticky” points for them to keep coming back to you. You may find that on occasions the retained consumer driven business offsets some of the business lost due to lost consumers. Keep working on your competitive advantage such that you are always ahead of others and incorporating environmental changes that may have occurred.

The important aspect to remember on both counts – burn and churn, is that even after you breakeven and profits are on the right trajectory, you cannot afford to take your eyes off these parameters.

Also Read: 5 Questions an Entrepreneur should introspect about.

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