I subscribe to a lot of newsletters and blogs. A few of them I even get around to reading too. One in particular focuses on start-ups.

If you’re in a start-up, you should read this chap’s stuff. He’s memorably called Tomasz Tunguz and he’s a VC investor in software-as-a-service companies with a firm called Redpoint.

One particular post that sticks in the mind is called: Which To Prioritize – Churn or Growth? The answer, in case you didn’t have time to read his article, depends on your maturity as a business, but for early stage start-ups it’s churn. The one thing you need to establish as a start-up is product-market fit. You want to demonstrate how difficult your early customers think life would be without your product, which is why they’re all staying around. The stickier it is, the better your long-term prospects.

Tom – I don’t know him personally but I suspect he prefers to be addressed as such – offers many more reasons why churn is what you focus on instead of growth. For me it boils down to the business model. If you’re in an annuity-based business, founded on recurring revenues, then the more customers you can retain and renew, the greater your revenue starting-point is at the first of the year, before you’ve even begun to win new bookings.

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