How to Predict Churn (with 90% Accuracy) - StartupSauce SaaS Podcast Ep#1 Aaron Kassover
Jul 19, 2024![Reduce churn risk podcast thumbnail](https://kajabi-storefronts-production.kajabi-cdn.com/kajabi-storefronts-production/file-uploads/blogs/2147510544/images/fe75634-52e2-a072-8633-224eae4b304_thumbnail-full.webp)
This is a transcript from my recent SaaS podcast interview Episode #1 with Aaron Kassover, founder of AgentMethods.com
Watch the full interview here.
In this episode you can expect to learn:
- Why “scratching your own itch” doesn’t work and what to do instead
- The key decision Aaron made that massively increased his sales
- The framework Aaron uses to predict whether a customer will churn, with over 90% accuracy
Here's a short 5-minute clip.
Also, you might be interested in these as well:
- 10 Clever Tactics To Reduce Churn in Your SaaS
- 11 Key Metrics for SaaS You Need To Be Tracking
- How to Sell Services WITH Your SaaS - StartupSauce SaaS Podcast Episode #2: Andy Allen HikeSEO.co
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[00:00:00] Aaron Kassover: I don't think you have to be an insider. You don't have to come from that industry to do it. You just have to spend the time to learn what, what pains they face.
[00:00:09] Ryan Wardell: How do you think about risk?
[00:00:11] Aaron Kassover: Right? There's the myth that entrepreneurs are, are, are risk takers and it's not true.
[00:00:18] Ryan Wardell: What are your thoughts on AI?
[00:00:22] Ryan Wardell: I think that Aaron Kassover, welcome to the show.
[00:00:25] Aaron Kassover: Thank you. It's, it's great to be here.
[00:00:26] Ryan Wardell: Let's uh, let's start off with something pretty spicy. What are your thoughts on AI? Okay.
[00:00:34] Aaron Kassover: So. First thing I want to say is I, I am not like an ostrich sticking my head in the sand and pretending it doesn't exist. So, caveat what I'm about to say with that.
[00:00:46] Aaron Kassover: Um, I, so my clients are insurance agents and usually they're, they're not the first to adopt new technology, but uh, News of AI has reached [00:01:00] my industry. And so people are asking about it. You know, how do we use it? And I, I always turn them around and say, well, what, what do you want it to do? And nobody really knows.
[00:01:09] Aaron Kassover: But I was, I was at a, uh, conference. It was a meeting of a bunch of CEOs. It's like an executive group on McArthur. And these are CEOs of all different kinds of companies. Um, pretty, you know, some pretty big, several hundred million dollar in revenue companies. And, you know, I'm, I'm one of the tiny companies there.
[00:01:29] Aaron Kassover: Some old school, you know, like old trades and manufacturing. And so we're all talking about AI. And so they brought in a speaker. To, to tell us how AI is going to change the world. And one of the things he said is, How many of you have a budget for stock photography? And of course, every, every hand in the room goes up.
[00:01:50] Aaron Kassover: And he's like, well, you can just strike that off your budget. No more stock photography. You could just go to AI, to Image Journey, or Dolly, [00:02:00] and tell it what you need, and it will create your stock photography. And on our platform, we license a lot of stock photography. For our customers to use. And so I was like, well, that'd be cool if I could not do that anymore.
[00:02:13] Aaron Kassover: So our customers, again, insurance agents. And so I thought, what's a picture. They might want to use. And so I thought about agents selling to Medicare customers over 65. And so I said, give me a photorealistic image of a 65 year old couple happily dancing in their kitchen while preparing for a dinner party.
[00:02:36] Aaron Kassover: It's a great photo, right? You can see that on the insurance website. This happy couple dancing in the kitchen, um, you know, with like a half cooked meal in the background or something. So let me show you.
[00:02:50] Ryan Wardell: Got it. What's, what's wrong with this image? If anyone's listening to this, uh, yeah, it's, it's, there's, there's clearly a guy wearing a dress. Is, have they switched around the heads? Is that [00:03:00] the, the, the, the, the, the females? The one on the right is a bit hard to tell.
[00:03:04] Aaron Kassover: There's nothing wrong with this image. Um, but there, there is some context that, that is important and, and so, um, yeah, we have a guy, maybe he's Scottish, maybe it's a kilt, um, but this, this is just such a funny thing to me.
[00:03:23] Aaron Kassover: It's just like AI in one picture. It's like the, if you, if you stand 50 feet away and squint, it looks great, but once you get up and close, get up close and look at it closely. It's, it's not ready. The, the,
[00:03:34] Ryan Wardell: the shoes look a bit off. That doesn't look like a human foot and there's, yeah, the, some of the cuts, the, the, the stuff in the background.
[00:03:42] Aaron Kassover: He's got one high heel shoe and one low heeled shoe. Oh, I think there's like a colander hanging on the lamp or something.
[00:03:52] Ryan Wardell: Yeah, there is. You're right.
[00:03:53] Aaron Kassover: Yeah.
[00:03:54] Ryan Wardell: Oh, wow. It's
[00:03:54] Aaron Kassover: like the kilt. The kilt is the thing and I'd also [00:04:00] say they look pretty old. Yeah. Like if I were 65, I want to, I want to look fit and handsome and healthy and they look pretty old.
[00:04:07] Aaron Kassover: It's been a rough 65
[00:04:09] Ryan Wardell: for these people. Yeah,
[00:04:11] Aaron Kassover: rough year. So, um. Yeah. I'm not going to, I'm not going to cut my stock photography budget yet.
[00:04:19] Ryan Wardell: Awesome. So, well, let's, let's just switch context again. So just, just, uh, for anyone who's never met you yet, um, tell me what is agent methods and who is it for?
[00:04:28] Aaron Kassover: So we make a, we make marketing software for independent insurance agents.
[00:04:34] Aaron Kassover: And so our, our customers are, you're in the U S only. We only sell the agents in the U S, but that it's like your local, uh, Insurance agent, Main Street agent, or the person that you buy a life or health insurance from. And they are, the term independent is an important thing because that means they don't work for an insurance company.
[00:04:57] Aaron Kassover: So there's, there's two types of insurance agents. There's the ones who, [00:05:00] they're called captive and they are representative of one company. If you go to, if you go to talk to them, you'll buy an insurance policy from that company. And there's independent agents who can sell any company. And so they're going to go and help you find the right insurance policy.
[00:05:14] Aaron Kassover: Product for, for what you need. They have a problem because, because of regulation, because they're independent, the insurance companies have very strict rules around what they can do to support.
[00:05:26] Ryan Wardell: Okay.
[00:05:27] Aaron Kassover: So they can't provide them with much in terms of marketing materials or client generation, materials, websites, email, stuff like that.
[00:05:36] Aaron Kassover: So they have to do it on their own. And these people are salespeople. They're, they're not web designers. They're not marketers. They're not copywriters. And so our platform helps them do all of that. So they have a website builder, so we can watch and run their website for them. We have email. Marketing and email automation system, [00:06:00] social media posting, scheduling.
[00:06:04] Aaron Kassover: Those are the big ones, but kind of the functions they need to run their business. And then on top of that, we have a content library that provides content, templates, pre written campaigns, pre written newsletters. Um, we do blogging so that all of that work of kind of lighting up their, their marketing is taken care of for them.
[00:06:24] Ryan Wardell: Fantastic. Where, where are you sitting right now in terms of revenue and team size?
[00:06:28] Aaron Kassover: So we, we are revenue, we're, we're in the seven figure world. Um, team size, we, we in the U S we have sales and support and sure product management here. There's, there are eight of us in the U S. And then we have, um, development and some backend support in Asia.
[00:06:49] Aaron Kassover: We have six in Asia.
[00:06:51] Ryan Wardell: And what's the origin story? Like how did you, uh, of all fields, did you, did you work in insurance? Do you have a background in insurance? How did you come up with the idea? How did you come across the problem initially?
[00:07:02] Aaron Kassover: I was consulting. And so I started my career working for one of the biggest ad agencies in the US, a company called Leo Burnett.
[00:07:12] Aaron Kassover: And if you, if you think about any brand that has like a cartoon character mascot, it's probably the ubernet. So McDonald's, Ronald McDonald, uh, rice krispies, the snap, crackle, pop the jolly green giant. You know, so this is like an old school ad agency and they had launched a web development arm. And so I was hired in to that closely out of college to help them go back to those customers and.
[00:07:44] Aaron Kassover: Um, launch websites. This was in, this was in the nineties when this was all new enough. And so we, we got to launch, um, poptarts. com and mcdonalds. com, united airlines. com, hallmark. [00:08:00] com. You know, some, some huge brands and it was, it was a great experience. I worked there for about a year and then I sort of, you know, foolishly said I can do this myself and went off and started doing consulting.
[00:08:11] Aaron Kassover: Um, on websites, website development, and I got one client that was an insurance company. And this is, this is how it goes with consulting, right? You get, you get one and then somebody left and went to, went to another company and brought me with, and then somebody left there and brought me with. And then I woke up one day and all of my clients were insurance companies and I didn't plan on that happening.
[00:08:36] Aaron Kassover: Um, but it's sort of just, you know, a space I fell into. And I was working with one of those companies and their head of marketing asked me this question, which is, you know, this work that you're doing for us, because of all these rules, we can't do it for our agents, but they really need it. Do you know of anybody who can help our agents with their online marketing and run that for them?
[00:08:58] Aaron Kassover: And I, of course, [00:09:00] said no. And, you know, went back to work and then the next morning I woke up and was like, wait a second, wait a second. And so I called him up and asked if, if I had, if I had this solution, would he bring it to his agents? And his response was, when can we schedule the, the webinar with me?
[00:09:19] Aaron Kassover: And so we, we pushed it out like 90 days, give me 90 days about the, the, the simplest, simplest, most rudimentary, we call it MVP now that, you know, just like duct tape and chewing gum version. And 90 days later, we did a, did a webinar and, uh, brought on seven clients. Yeah. Wow.
[00:09:41] Ryan Wardell: Wow. And then, then you're off to the races after that.
[00:09:44] Ryan Wardell: Is that the, how, how did you get your first hundred customers? How did you go from seven to a hundred?
[00:09:49] Aaron Kassover: Yeah. So that says zero to seven was really easy. Seven to 100 was, was slower because I got those seven clients and I was like, okay, we were charging, you know, way underpriced. [00:10:00] We, we just, you know, the idea was low cost self service, you know, easy, remove all barriers to entry and.
[00:10:11] Aaron Kassover: So we, we got a handful of clients, had some billing coming in and then I just went back to work and kind of forgot about it and I had ideas of things I wanted to improve, but it really, it really wasn't the focus for a long time. And so it just sort of kind of simmered. And I think about this a lot with, with SAS, especially founded SAS.
[00:10:34] Aaron Kassover: There's, there's like such an urgency to get to a hundred and to grow fast. And, and we hear a lot about the, you know, the, the rocket ships that take off and. You get to 25 million in revenue in seven months, you know, this, these insane stories. I think those are, those are the minority. The majority is just kind of a slow simmer.
[00:10:55] Aaron Kassover: And that's how it was for us. It was, you know, we just picked up a client or two here, [00:11:00] there over time. And I don't know when we crossed a hundred. I don't, I don't remember how fast it was, but it, you know, it wasn't because of any kind of magic trick. It was because we just were in the market, provided a service that people needed.
[00:11:11] Aaron Kassover: And as, as we got more exposure, we got more signups.
[00:11:15] Ryan Wardell: So you, you didn't set out to build, uh, something for the insurance industry straight away. You just kind of, you know, that's just sort of the path that ended up opening up for you. Do you think a lot of founders, cause you see a lot of the same ideas getting Rebuilt and rebuilt and rebuilt.
[00:11:33] Ryan Wardell: Everyone's just trying to build a better mousetrap and it sort of feels like there are lots of other industries, lots of other problems that could be solved and need to be solved, but nobody's building solutions for them and everyone's kind of competing to build another photo sharing app or another, you know, yet another social network, but yet another me too kind of pro.
[00:11:49] Ryan Wardell: What are your thoughts on that?
[00:11:51] Aaron Kassover: Yeah, there's, I mean, there's so many like consumery kind of ideas. I get all these people call me up and say, I have this idea. Yeah. Where, you [00:12:00] know, you can go in restaurants, you can, you can get on the waiting list using your cell phone. And it's like, okay, that's, that's cool, but it's not, you know, it's not a big problem that people are gonna pay a lot of money for.
[00:12:13] Aaron Kassover: And I think that we're, we're drawn to problems that are in our own space. You know, so like the whole scratching your own itch. That's a phrase we hear, right? Scratch, scratch your own itch. I think most of the itches that are, um, related to, like, software development or kind of entrepreneurialism, Are very well scratched at this point and to the point where they might be kind of raw and if you touch them, it's going to hurt.
[00:12:40] Aaron Kassover: So I, I don't think it's like, that's not to me a good mantra today. Like scratching your own itches can be fun. It can be inspiring, but the there's lots of big problems to solve and less sexy businesses. If you go out and look, I don't think you have to be an insider. You don't have to come from that industry to do [00:13:00] it.
[00:13:00] Aaron Kassover: You just have to spend the time to learn what, what pains they face. Every. Every industry, there's tons of unsolved problems to, to, to tackle. There's tons of pain to go and solve. But we just have to go and look beyond kind of where we're at. So, I, I feel pretty strongly about that. That, um, You know, if we can get out of our own world a little bit, there's so much to do still,
[00:13:25] Ryan Wardell: but
[00:13:25] Aaron Kassover: all the, all the problems here are already well, well solved.
[00:13:29] Ryan Wardell: I think someone said to me once that, um, uh, some, most, most SAS businesses are started by people with a background in software. It makes, makes sense. But if you think about the, if you're working as a software engineer. There's a finite pool of problems that you're likely to encounter on a day to day basis.
[00:13:44] Ryan Wardell: You know, that's why you've got something for restaurants. Maybe you go out to dinner. That's why there's more software, you know, yet more developer tools. Um, but a problem for an insurance agent, you're not going to come across unless you're talking to insurance agents, unless you happen to be consulting for them.
[00:13:58] Ryan Wardell: So that's how the genesis of [00:14:00] this fantastic. Is there anything that surprised you? Like what, what marketing channels did you, did you use? Were they effective? Um, what, what worked and what didn't. Work for you when, when reaching that audience, given that, you know, you kind of came from a different world to, to your customers.
[00:14:15] Aaron Kassover: You know, the, the whole scratching your itch, our niche thing, it goes way beyond the problem that you solve. It's, it's like how you engage and how you market. And I mentioned before my, my original vision was this like low cost, you know, cause it's like, Oh, cheap. So it's an easy decision and self service.
[00:14:33] Aaron Kassover: So you can go sign up. And when we think back to, especially consumer or kind of prosumer SaaS, You see low price points and you see like 30 day free trial, you know, lots of kind of removing that friction, please don't ever call them. Don't don't have a reach out. And, and as sort of a techie person, that's how I want to buy.
[00:14:58] Aaron Kassover: Also. I want to, [00:15:00] I don't want to have to talk. I don't want to have to get on the phone and do a sales presentation. Forget that schedule a demo. I want to go and. You know, on my own time, without having to speak with anybody, do a demo, or do a trial, and get in and get my hands dirty and play with things.
[00:15:19] Aaron Kassover: And, I think to a lot of tech founders, tech people, that makes sense, right? I mean, I don't know how you want to buy, is it, you know, do you? Why not get on a sales call with somebody or do you want to just go and try it? We've been writing. Yes. I think it's the try it.
[00:15:37] Ryan Wardell: Well, it's funny that you say this. I was talking to Andy Allen from Hike SEO, uh, earlier today, and he was saying, so, um, It's a, it's a tool for, uh, small business owners to do their own SEO.
[00:15:51] Ryan Wardell: It's like a self serve thing. And he was actually telling a story where they, they had a book a demo button in there. And that was just the path. Like from the very beginning, it was always book a demo, book a demo demo. [00:16:00] And then someone got sick, they weren't able to do it. So they pulled it out and made it self serve and their conversion rate increased.
[00:16:06] Ryan Wardell: So I think it kind of highlights the point that you really need to know your customer because people buy in different ways and some people want a phone call. Some people want, um, To be left alone and just to, to, to play with the tool themselves. I mean, I, I personally, um, yeah, I, I'm like you, I'd rather just, you know, I don't want to talk to anyone.
[00:16:23] Ryan Wardell: Let me jump in and see if I like it. See if it's for me. I want to, you know, try and try and break it. I want to use it in anger first to see, you know, how, how does it stack up? But a lot of the people, a lot of the world doesn't work that way.
[00:16:35] Aaron Kassover: Yeah. I think most of the world doesn't work that way. And. So this is like, we were scratching our own itch.
[00:16:41] Aaron Kassover: I was like, let's make it self service and please don't ever call us. And that I had to, I had to learn, I had to unlearn that. And I had to learn that, you know, not only do my customers have problems they need solved, they, they want to be marketed and sold to in specific ways. [00:17:00] And, and every industry is different.
[00:17:02] Aaron Kassover: There's the selling SEO tools to small businesses is different than selling tools to insurance agents, small businesses, but a very specific kind. And it wasn't until I dug into that and not just figured out what problems my clients have, but how they want to go about learning about solutions for those problems and acquiring products to solve those problems that we would really kind of hit the, hit the nail.
[00:17:31] Aaron Kassover: We had a great product, but we weren't, we We weren't connecting with our market the right way.
[00:17:36] Ryan Wardell: How far into the journey were you before that, that penny dropped and you had that realization?
[00:17:41] Aaron Kassover: Embarrassingly far,
[00:17:47] Aaron Kassover: um, embarrassed, partially, partially because you know, this started as a side project. And so it's like, well, I don't want to have to go on the phone and wreck my day with a bunch of sales calls. And also at, you know, 20 bucks a month, you can't do sales calls. So [00:18:00] I was like, well, I can't afford to do sales calls.
[00:18:02] Aaron Kassover: And so it took a long time of customers, you know, trying To trying to do this on the phone to realize, Oh, this is what they want and that it's not the price or the ease of signup that they care about. It's, it's the problem they need solved. And when we figured that out, we realized that we could charge a lot more because we understood the value of the problem better and that the price price was not the feature that they were buying.
[00:18:30] Aaron Kassover: There wasn't no price. So we, we realized that we could, we could charge a fair amount. Yep. Appropriate amount for our service and still do live sales, live support, live engagement. We, we added a like, like hike, we added a button that was the opposite. So we had the sign up now or schedule a demo. And this was on our pricing page first.
[00:18:59] Aaron Kassover: [00:19:00] And. Immediately, immediately, almost a hundred percent of the people chose the demo. You know, it wasn't 50, 50. It was like in a year, hundreds and hundreds of demos and maybe a half a dozen people went in and did the trial.
[00:19:16] Ryan Wardell: It was that clear cut.
[00:19:17] Aaron Kassover: Wow. It was that clear cut. We went a step further and we, so then we changed our call to action on our homepage from, you know, try it now to schedule a demo we had pricing on our site.
[00:19:29] Aaron Kassover: You can go and see what it cost. And almost none of our prospects had even looked at the pricing page. They, they were looking at what we did. And they want to get on the phone and talk to us and they want to discuss how we solve the problems and understand that before they turn up our price.
[00:19:50] Ryan Wardell: So you're, the way you'd kind of envision that whole user journey was, was probably backwards.
[00:19:57] Ryan Wardell: You know, what I would think is go to pricing page [00:20:00] first. If that's in within your budget, then you go through and you're like, okay, now I'll talk to someone or now I'll sign up and give it a go. But they want to talk to someone first.
[00:20:08] Aaron Kassover: They want to talk to someone first. They want to get their questions answered and they want to, to, to my customers, the live sales demo is much more efficient than just poking around on their own.
[00:20:22] Aaron Kassover: If they can get on a call with somebody on my team for half an hour to an hour, talk about their business, their problem, what they're trying to do, they'll get the answer they need and make a decision. Whereas if they get a free trial, it's like 14 days of screwing around and not really knowing.
[00:20:38] Ryan Wardell: So, and, and then they end up churning because they weren't able to figure it out.
[00:20:42] Ryan Wardell: Uh, yeah. And then
[00:20:43] Aaron Kassover: they're not successful.
[00:20:43] Ryan Wardell: Yeah. Yeah. Yeah. Yeah. So if you, if you change that around, so, so, so do customers have to go through a demo now? How have you changed your, your sales process or your, your, your, your final as a result?
[00:20:55] Aaron Kassover: They, they do, they do have to. Yeah. And [00:21:00] that sounds worse than it is because they all want to, but we don't even bother with the self service because those customers are almost never successful.
[00:21:09] Aaron Kassover: They sign up and then they don't activate, they don't, they don't get the pieces in place they need to, to succeed. So yeah. Um, we just shut that channel down because it, it didn't work for us.
[00:21:21] Ryan Wardell: What else did you need to change? So once you had that realization, okay, we're gonna, we're gonna put people through a demo first.
[00:21:27] Ryan Wardell: Um, and everyone's going to talk to a salesperson first. I mean, you, you, you talked about changing your pricing. Were there, there, there any other impacts that you noticed? Did you have to change your onboarding? Did that affect, uh, retention? Like, what, what did that look like for you?
[00:21:41] Aaron Kassover: You, I mean, you can kind of like this switch right from self service to sales driven, you can almost run that through every piece of our funnel and our customer relationship.
[00:21:52] Aaron Kassover: So how our customers do research, they, they generally don't go to Google and start typing in search queries [00:22:00] or they don't click on ads. And so we were working hard at pay per click AdWords. We were working hard at SEO and we discovered that those are actually the kind of the worst channels for us to get customers because.
[00:22:14] Aaron Kassover: Customers that are driven by that self service research and purchase were tended just not to be the customers that were successful in our platform. And so we had to look at, you know, acquiring customers differently, different channels to, to get in front of our market. And then the same thing on the success side, these are customers who don't go in and figure it out.
[00:22:36] Aaron Kassover: And so we added live onboarding. So every one of our customers, we charge for this, but they go through a onboarding process. It's about four hours of one on one Zoom calls. And so we have an onboarding success team that helps them get activated. And that great, I mean, that goes from, that took our success from like 50 or [00:23:00] 60 percent to basically 100%.
[00:23:01] Aaron Kassover: Wow. Because we can make sure that every customer gets everything done. They need to get done. And, and, you know, We're not quite project managing them, but in a sense we are. We're, we're, we call it done with you. So we're there with them, teaching them how to use our platform and getting all the pieces in place that they need to be successful.
[00:23:22] Aaron Kassover: So at the end of that, you know, they're not figuring things out. They're up and running. They're, they're, they're seeing results. They're getting the benefits. Pieces are in place.
[00:23:29] Ryan Wardell: Is that a filter? Like, is that one way of, of helping you decide whether this person is going to be a long term customer or not, or do you have other ways of, of kind of deciding?
[00:23:40] Ryan Wardell: Cause you know, I think, I think some people fall into the trap of, um, everyone is my customer. Um, and then whenever they see people leave, they're kind of optimized for the people who leave rather than the people who stay. Um, right. So yeah. What are your thoughts on that?
[00:23:55] Aaron Kassover: If you compare a paid onboarding with a live sales demo, To a free [00:24:00] trial, somebody who's invested half hour to an hour in a sales demo, or maybe even multiple calls and then paid for onboarding and sat through four hours without the level investment they have versus somebody who created a free trial is it's, there's no comparison.
[00:24:18] Aaron Kassover: And so they're, they're more, more invested in our product, but also. You're not going to do that work and pay the onboarding. If you're not sure, if you are still kicking the tires and you're just not ready to commit, um, it is a test. It is, it is like a commitment test. And definitely that, you know, that had huge impacts in our retention because the customers we're bringing on board, we're, we're not thinking 30 days out.
[00:24:46] Aaron Kassover: They were thinking one to three years out.
[00:24:48] Ryan Wardell: Is there anything else that you look for that would tend to indicate, uh, this is the sort of customer that's going to be successful. And this is the sort of customer that. You know, it might be better served by using something else instead.
[00:24:58] Aaron Kassover: I was talking to a [00:25:00] relatively new SaaS founder a couple of weeks ago, and he was in the all revenue is good revenue mindset.
[00:25:08] Aaron Kassover: So it's like, you know what? I. Even if they churn in 90 days, I get 90 days of billings from, so it's, it's money. And I get that because if you just quit your job and you have rent to pay, you need to have billing coming in. But on the other hand, we're, we're building subscription businesses and the subscription kind of by nature of somebody who keeps resubscribing to your product.
[00:25:29] Aaron Kassover: So, um, the value, the long term value of, of, uh, SaaS business is that subscription is, is retaining those subscriptions. And once you get beyond just kind of paying your rent every month and, you know, being able to survive. As SaaS founders, we have to look at what's the value of the organization that we're building.
[00:25:49] Aaron Kassover: And that is based on our long term retained clients and our client subscriptions. So, we're now at a point where we don't want those quick churn, [00:26:00] like those, those customers that are going to stay less than a year, customers that are coming in and sort of thinking, we'll try it, see if it works, but they're not really sure.
[00:26:09] Aaron Kassover: We want them to do more research before they sign up. And so, we, we do push back. And so, we, If we talk to somebody in a sales column, we think that they're not ready, or they're not a good fit, or the problems that we solve are not the problems that they have. It's not nailed. You know, we will tell them no, or we will work with them to kind of dig in a little more to make sure that it fits there.
[00:26:33] Aaron Kassover: It's two way. You know, it has to be. That's for a customer who otherwise is a, is a kind of a good qualified customer. There's an entire universe of people who, who aren't the right fit, who aren't qualified. And so we've, we've developed some tests to kind of pre qualify our pipeline. And we, we know that there's some customers that are just not going to be successful.
[00:26:56] Aaron Kassover: That they're, they don't have the pieces in place in their business to see long term [00:27:00] success using ours. And so, we could say, well, you know, we might get six months or a year revenue out of them. We're not going to get a long term successful customer and so we, we don't want to sell to those customers because that's not what our business is built
[00:27:15] Ryan Wardell: on.
[00:27:17] Ryan Wardell: How, how long did it take you to sort of identify the traits of the, the companies that are going to be successful and sorry, the businesses that are going to be successful and the businesses that are not going to be successful. Um, like is, is that, is that. Years of data. Is that phone calls and conversations?
[00:27:34] Ryan Wardell: Is that something that you kind of realized?
[00:27:36] Aaron Kassover: My answer is always going to be too long and maybe because we're all impatient, right? It's like everything is takes too long, but I think that I, you know, I, I have had kind of blinders on and we, we, we have a way and it's, it took me a long time to recognize good customers from bad customers.
[00:27:54] Aaron Kassover: There's some pretty simple things. Um, We can, for us, we look [00:28:00] at, uh, how long they've been an insurance agent. So if it's less than a year, it's, it's a really hard job to get started. The half life of a newly licensed insurance agent. You can, you guess how long people, if you, if you went to insurance class today and got licensed today, how long would it be until half of your classmates quit the business?
[00:28:21] Ryan Wardell: Is this one of those things where they say, you know, like 90 percent of small businesses fail within the first year. Is, is, is that kind of a statistic or is it?
[00:28:28] Aaron Kassover: Yeah. Really?
[00:28:29] Ryan Wardell: Really?
[00:28:31] Aaron Kassover: So the half life is 13 weeks. Whoa!
[00:28:34] Ryan Wardell: Oh, okay.
[00:28:35] Aaron Kassover: Wow. So, so people go, you know, and it's, it's, like, I can go sell insurance. I'll go try it out.
[00:28:41] Aaron Kassover: That first year is really, really hard. You sell a policy to your neighbor and your, your mom and a couple friends, and then you're just like, what do I do now? Now I'm that annoying guy at the party. Um, trying to talk about life insurance or, you know, ask people about their health insurance. It's really, it's, it's a hard first year, [00:29:00] third year, the fifth year, the 10th year become amazing because once you have a, a, a client base, a book of business, you know, retained, um, policyholders, it's like a subscription business where, you know, they keep, they keep renewing their policies.
[00:29:16] Aaron Kassover: You know, many of the policies will pay commissions on renewal. And so there, there are agents that, you know, are, are making hundreds of thousands or millions of dollars a year. Just on renewals not all of them, but it's out there, but that first year sucks And and so they're looking for holy grails or looking for like what can I do?
[00:29:37] Aaron Kassover: And so they see our platform and they hear about what we do and they're like, okay, maybe this is it And so we know we have a never ending stream of brand new agents knocking at our door were too expensive, and they're not going to see the results yet because they don't have the raw material in their own business to, to, for us to work with.
[00:29:54] Aaron Kassover: And so that's the first filter. It's like, if you, if you haven't been in business for one year. Um, you [00:30:00] know, chances are pretty good. You're not going to be successful in our platform. And the second is the size of the business. So how many, how many, um, how many insurance policies have they sold? Because you can stay in the business for a year.
[00:30:14] Aaron Kassover: And sell six policies if you, if you have a spouse that's bringing in your income or something else. So we, we have those two filters. When we came up with this, this was last year, about a year ago. We went and we, we kind of created a little grading rubric of how good a customer is, you know, how strong the fit is based on those criteria.
[00:30:38] Aaron Kassover: And so we went back and looked at all of 2022, every customer that signed up in 2022. And we went through and we graded them all one, two, or three, three is like dream customer. You know, they, they are a perfect fit. They check off all the boxes of what we want in a customer to is a base hit, a good [00:31:00] customer, um, but not perfect.
[00:31:02] Aaron Kassover: And one is probably doesn't meet our criteria, not a great customer. So we graded all of our customers at the end of 2022, about 15 months later, we had a All the threes were still customers, so 100 percent of them were with us. Wow. So the good, of course, to them, they got the value. We were able to deliver what they needed.
[00:31:24] Aaron Kassover: It was, it was, our price is a no brainer for them compared to what they see in return. 100 percent of them were still customers. Of the twos, 15 months later, it was about 90%, so we retained, you know, more, most of them.
[00:31:38] Ryan Wardell: Yeah.
[00:31:39] Aaron Kassover: Of the ones. None were still customers. Wow.
[00:31:43] Ryan Wardell: Wow.
[00:31:44] Aaron Kassover: A hundred percent had churned.
[00:31:47] Ryan Wardell: So that's a pretty, pretty watertight process then for, for grading them.
[00:31:52] Ryan Wardell: Yeah.
[00:31:53] Aaron Kassover: Yeah. Yeah. I think, I mean, I think in our business, that, that criteria tells you a lot. It's like, okay, so if we're looking for long term [00:32:00] happy customers, customers where we're adding long term value, just don't even sell to ones. Somebody, you know, if the criteria tells us We, we tell them, you know what, we're not the right solution for you, or at the point in your business, you're not going to see the return you want.
[00:32:15] Aaron Kassover: So, you know, if you can, if you can do these things, call us back and, and, you know, then we can talk about how we can help you.
[00:32:21] Ryan Wardell: I think a lot of, a lot of SaaS founders are probably sitting there thinking, okay, well, like I would love to be able to know for sure that this kind of customer is still going to be around, you know, a year later, two years later.
[00:32:32] Ryan Wardell: Um, if I had a better way of identifying them, that's, that's a concrete tactical thing that I could do that is going to help me. Aid with retention, just being able to find the best customers in the, in the first place. Is there anything else like any other specific tactics that you use for reducing churn and agent methods?
[00:32:49] Aaron Kassover: Yeah. I mean, the customer criteria thing, it's really tough, right? Because I got there after years of data. And so we didn't start there [00:33:00] and most of us that bootstrap start kind of in the low end of the market. So it's, you know, if, if you're bootstrapping a software business, you're not going enterprise, you're going at, you know, you're going small sales first.
[00:33:15] Aaron Kassover: And that's, you know, what we found is like those really small unstable businesses are bad businesses and that's, that's an obvious thing. Um, but you have to, you have to do enough of that to get the data to recognize what it is that makes them bad.
[00:33:30] Aaron Kassover: It's, it's, it's tough to tell somebody who's, you know, brand new starting out, you know, my story.
[00:33:36] Aaron Kassover: Because it, you know, I didn't wake up knowing this. It, it took a long time to figure it out. Um, but then retention beyond that. So, so keeping customers long term. Um, I think that's a never ending struggle, like every single cancellation is like a stab in my heart. Um, I probably should like not even see [00:34:00] them, I have to look and you know, it's, it's always like, you know, a bit of me dies.
[00:34:05] Aaron Kassover: Um, we're trying to take a really open mind about that and look at every customer and, Um, if we can, um, get some feedback, it's really hard to get feedback from cancel customers because by the time they're canceled, they're done. Um, I've, I've tried to do things like where we've tried to like pay people who've canceled to come and talk to us, just tell it, tell us, you know, what was your process when you decided to cancel?
[00:34:31] Aaron Kassover: What, what were you thinking? Um, you know, we've offered 50 gift cards for a 15 minute call and those are really hard to get. I thought that'd be a no brainer, but people don't want to talk about it at that point. Just too bad. for coming. Because we want to learn. Um, but we, we do look at the success factors we see customers that are succeeding in our platform are hitting.
[00:34:56] Aaron Kassover: And so we've, we track usage, we, we track their [00:35:00] activities, and we've, we've built a dashboard in our system that shows us customers that are not doing those things. And so we we look at it as a, as a list of kind of potentially at risk customers. So we, you know, we have a list of customers that We see they're not hitting all of the criteria that we think they need to hit to be really successful on our platform.
[00:35:22] Aaron Kassover: And it's kind of a, by hell or high water, how can we get them to, to go and change their behavior? Sometimes they don't need to. Sometimes we talk to them and they're like, yeah, that thing that you're tracking. I don't care about that, but I love everything else.
[00:35:36] Aaron Kassover: And sometimes they're okay. Um, but sometimes they need something.
[00:35:39] Aaron Kassover: Yeah. And if we can get to them. before they think about cancelling. If we can be proactive instead of reactive, we can help them get that value. And so that's, that's become a really big focus for us is, is like being proactive, you know, before churn to go and find customers that need help.
[00:35:58] Ryan Wardell: Do you know how long it takes just out of [00:36:00] curiosity?
[00:36:00] Ryan Wardell: Do you know how long it takes between when you start seeing some warning signs and when they actually cancel? Like what's, what's, what's the lead time on that? Is it, is it six months? Is it 12 months out? Is it a few weeks? I
[00:36:10] Aaron Kassover: don't know. I don't know. Um, and it's probably, it's probably like buying things, like cancelling things is probably a different
[00:36:19] Ryan Wardell: journey
[00:36:20] Aaron Kassover: for, like there's a, a cancellers journey.
[00:36:24] Ryan Wardell: I, I had a, I had a mentor who used to say it's, it's, it's almost like breaking up with someone, like you, you mentally check out long before you actually get around to having a conversation. And then, and then afterwards, if they said, Oh, well, you know, what, what did I do wrong? You don't really want to have to go and revisit.
[00:36:38] Ryan Wardell: That you've sort of already kind of moved on from there. So I understand why it's hard to get them to come back, um, at the point where they've already, already, already decided to, or, well, they, they long, they decided to cancel long before they actually hit the, the cancel button. Um, are there any other tactics that you use to reduce churn?
[00:36:54] Aaron Kassover: Yes, I'm not sure what they are. We, we, we're trying everything we can, [00:37:00] um, I mean, client retention is, is the most important metric. I think it's, it's like the number one, most important thing. And. I want it to be zero. It will never be zero, but we have to, we have to, as a SaaS founders, keep asking ourselves this question of how can we deliver more value to our customers?
[00:37:24] Aaron Kassover: How can we make our product better and improve their lives and their businesses and their results? And for us, that's, you know, that's never ending quest. That's how can we, how can we go and dig deeper? And make it more and more of a no brainer. So, you know, it's like, it's an obvious thing that using our software is so much better than not that it would never cancel.
[00:37:49] Aaron Kassover: This is, this is kind of a nirvana state. Yep. Um, but it's something that, you know, we're, we're asking ourselves this every day.
[00:37:57] Ryan Wardell: If you had to point to one thing that you've tried, [00:38:00] that's been really effective, um, is, is it just that being proactive and reaching out to them when you start to see that the, the wheels are coming off a little bit?
[00:38:06] Ryan Wardell: Is there, um, any, any other churn reduction tactic that you've tried that you could say, you know what, that, that's an absolute winner?
[00:38:12] Aaron Kassover: Yeah. I mean, I, even the being proactive thing, it's, it's hard to, it's hard to know. I mean, our, our churn has continually gotten better. Retention. So I know that things are working.
[00:38:22] Aaron Kassover: Um, But I don't, I don't know, I can't tell you how much that's, who that's saved. So it's, it's hard to point to one thing, um, you know, for us, if you, if you go back and look at our, our recurring revenue graph, the, the hockey stick changed, you know, we hit the hockey stick, like the, the rate of growth changed.
[00:38:44] Aaron Kassover: And that was when we went to live sales and live on board because. Getting the right people in, so they stay, and then making sure they get activated. Like, that's solving churn at day one. So as [00:39:00] opposed to one year from now, you know, if they're getting value and the system is working on day one, That greatly improves their success rate long term.
[00:39:08] Ryan Wardell: So some founders that, uh, they've got a problem with churn and they're trying to reduce it. Sometimes they need to look a little bit further up the funnel. If they're getting the wrong customers in from the very beginning, it's going to be, yeah, they're on this hamster wheel trying, just trying to keep up.
[00:39:20] Ryan Wardell: Whereas if they've got the right customers from day one, then, you know, 30 day, 90 day retention is going to be so much better. One year retention is going to be so much better. Um, and they're so focused on the, you know, the, the point of cancellation. If they just looked a little bit further back in time, they'd probably have an answer.
[00:39:35] Aaron Kassover: Right. If we, if we think about that 2022 where I went and graded all of my, all of our new customers, like if we never sold to those bad fit, those one, one out of three customers, if we just never even sold to them, I mean, first off today, they're not part of our recurring revenue anyway, because they're all gone.
[00:39:50] Aaron Kassover: But then they would never have shown up as churn,
[00:39:52] Ryan Wardell: you know,
[00:39:54] Aaron Kassover: if we'd never sold them, we, that would have, our retention in 2022 would have been amazing. We just had twos [00:40:00] and threes in our funnel.
[00:40:00] Ryan Wardell: Yeah. 90 percent stayed on or 100 percent stayed on. Yeah.
[00:40:04] Aaron Kassover: Yeah. It'd be better than 90 percent annually, which, you know, for, for a kind of a lower priced.
[00:40:10] Aaron Kassover: Monthly business would be great.
[00:40:12] Ryan Wardell: Just want to change tack for a moment now. Um, and just zooming out a little bit. So I want to talk about you as, as a founder, maybe how your perspective on, on building a business has changed over time. Um, how do you think about risk and, and managing risk? Is that something that's changed over time?
[00:40:28] Ryan Wardell: Is that something that's still been pretty constant from day one?
[00:40:33] Aaron Kassover: Right? There's the myth that entrepreneurs are, are, are risk takers and it's not, I don't think we're not out recklessly doing things. problem solvers. I think that early on, like I think about that, that phone call, right? I called back to that client of mine and said, Hey, if I did this in a sense that that was a risk, I didn't know if I could even build the thing, [00:41:00] maybe I'd pay for it.
[00:41:02] Aaron Kassover: Um, and so I, I did take some risks there. But I also kind of had nothing to lose. And so in those first days, when it's, it's just like, you're kind of getting from zero to one or, you know, your first a hundred customers, it's like, there is kind of nothing to lose. And so you just try everything. And so maybe we look risky at that point.
[00:41:27] Aaron Kassover: Entrepreneurs are out just kind of, you know, recklessly trying stuff, throwing spaghetti at the wall, seeing what sticks, you know, just, just playing around. I know that for us, once we found out what's stuck, you know, once, once we got some traction and started getting clients and we had a product that worked, then it became like super locked down.
[00:41:48] Aaron Kassover: Like don't, don't mess with the golden goose. And so we became super risk averse. And also we don't have, you know, we're growing business, we didn't have millions of dollars in the bank from, [00:42:00] from a venture capitalist or somebody else to go and gamble with. So we had to stay profitable, we had to stay lean.
[00:42:06] Aaron Kassover: So experimenting, doing, you know, trying on new channels and trying on new products and stuff just wasn't on the table for us. So I think we got very risk adverse. Now, we're kind of back to risk a little bit, because we're, we're looking for ways that we can reach our market faster. We're looking at ways where we can expand the value we create to our customers, um, and there is, there's sort of a barrier to entry of some sales and marketing channels where you have to have enough revenue to be able to even go play there.
[00:42:41] Aaron Kassover: And so now that we've gotten there, like we, we did a deal last year, um, with sort of an influencer type thing, and it, it cost us like 15 grand, and we had no idea if it was going to work or not. It did not. It did not work out. [00:43:00] Gambling 15,000 our first year, we were just getting going, would have killed us.
[00:43:07] Aaron Kassover: And, and so, so now we have enough going on, enough capital. To survive those those mistakes.
And I think that as you know as our steps get bigger as we're trying to cover more territory and move faster We have to we have to make Gamble is not the right word, but we have to we have to try bigger things We have to we have to have to take bigger steps and that that means that we are exposing ourselves to what might look like bigger risk
[00:43:40] Ryan Wardell: We almost need to get to a point where you've got the resources where either you can take, you know, place bigger bets, or you can place a lot more small bets without that sinking the company.
[00:43:51] Ryan Wardell: Yeah. Um, yeah, I think when you're first starting out, you've really only got the resources, especially if you're bootstrapping to, to try a couple of channels. [00:44:00] Before you run out of cash and, and you know, you got to go back and get a job. So, um, does it almost look kind of U shaped? Like at the beginning, you've got nothing to lose.
[00:44:07] Ryan Wardell: So you can swing for the fences and try some stuff. Cause if it doesn't work, well, you go back to your day job. But when you get to a point where you're full time, you're all in on this. This is, this is your income. This is what's paying, you know, what's paying the bills. What's paying, you know, your employee's bills.
[00:44:20] Ryan Wardell: You really can't go tinkering with it too much because if you have a few bad bets in a row. You know, you're done. This is
[00:44:27] Aaron Kassover: why we know like every SaaS founder in the world needs to raise their price. Right. It's like a hundred percent need to raise your price, but we're all so paralyzed and afraid because once you have customers that are buying at a price, changing that is freaking terrifying.
[00:44:44] Ryan Wardell: Yeah.
[00:44:44] Aaron Kassover: It seems so risky. It's, it's not, but it feels that way. And it's, it's because we're in that kind of that path where we're starting to get things that work. People are paying, uh, paying for our service a certain amount. Yeah. If we mess with that formula, we could screw up everything. [00:45:00]
[00:45:00] Ryan Wardell: Um, if you were to give one piece of advice to other SaaS founders, Aaron, what, what would it be?
[00:45:06] Aaron Kassover: Can I give them more than one?
[00:45:08] Ryan Wardell: Give me a top three.
[00:45:10] Aaron Kassover: Okay. Top three. Um, I think one is be patient and at least if you're, if you're bootstrapped. You don't, this is a marathon, not a sprint. And we, I know for me, I, I see all these stories. I, I hear about these, you know, I, I was joking about that company that goes from zero to 25 million in, you know, 30 days or whatever.
[00:45:31] Aaron Kassover: You, you're always benchmarking mar marking yourself against these like, crazy success stories. You don't know what went on there. Um, it takes a long time and sometimes ideas have to have to mature and evolve, or your market has to catch up with you. Mm-Hmm. , you know, sometimes you just have to be patient and.
[00:45:52] Aaron Kassover: I do see people start businesses and then, well, I tried that it didn't work and it worked, but they just, they hadn't given it time to [00:46:00] really get traction. Um, so that's one is, is, you know, be patient. This is, this is a marathon, not a sprint. Um, and the other one I think is, is kind of what I've been saying throughout our conversation, which is, um, it's the cliche.
[00:46:16] Aaron Kassover: It's like, talk to your customers, get, get to know your customers really well. Understand their pain, understand how they operate, how they buy, what the world looks like. You know, go, go sit in their office. Um, you know, spend time looking at what they do all day and, and see how they solve problems. See how they get help, see what they do when they, you know, when something's not working.
[00:46:42] Aaron Kassover: And. All of that information is, is so valuable because it's like our product is just a small part of how this fits into our client's world. The better we understand the interface, the better we can deliver the value that we're trying to deliver to them.
[00:46:59] Ryan Wardell: I think, I think that, [00:47:00] that second piece is, it's, it's sort of, it's, it's, it's interesting because it's kind of, It is a bit of a cliche sometimes, and yet even the most experienced founders that I've met, I'm, I'm a hundred percent guilty of this myself.
[00:47:12] Ryan Wardell: We think that we know our customer inside out. I don't need to talk to them. No, no, no. I've got this. I figured it out, but, um, the world's changed or the customers change or we don't know our customers as well as we think we do. Um, and it's always, I always learn something new every time I talk to, to, to a customer.
[00:47:26] Ryan Wardell: And so I think that's something that we have to work really proactively at. I know people that schedule that in, they'll block out certain amount of time per month. So just pick up the phone and talk to some customers. I suppose it's easier in your case if you've got customers that want to get on the phone call, bit harder if you're selling dev tools or something and they're absolutely averse to getting on a call with anyone.
[00:47:44] Ryan Wardell: Um, but, but I do, I agree with you. I think there's, there's a lot of value in, in talking to customers and understanding things from their perspective a little bit more. Um, because there's always more to learn. Um, Aaron, if, uh, if, if anyone's interested in learning more about agent methods or [00:48:00] in contacting you, what's the best way to get in touch?
[00:48:03] Aaron Kassover: The best way is, is, uh, AgentMethods.com is our website, um, and, you know, we're, we're growing. We've, we've got some, some pretty big hiring plans this year, and, uh, I know a park manager role is going to be opening up soon, so if you're, if you're interested in that, I'd love to talk to you.
[00:48:22] Aaron Kassover: Um, I guess I can give my email address. It's, it's my first name, Aaron at agent methods. com. Drop me an email on the
[00:48:31] Ryan Wardell: perfect. And if you find yourself on all sorts of random email lists that you never signed up for now, you know why?
[00:48:37] Aaron Kassover: Yeah, I'm going to unsubscribe. So saying I love to talk to people, but don't sign me up for
[00:48:43] Ryan Wardell: Aaron.
[00:48:43] Ryan Wardell: Thank you so much, mate. There was some really, really, really good insights in that. Really appreciate it. And I think anyone listening to this has probably learned quite a bit today. Thank you so much for your time, mate.
[00:48:51] Aaron Kassover: Awesome. Thanks for having me.
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