From Series A to Exit: Mastering Metrics
6/8: Retention
12 Min Read – What You’ll Take Away
Scaling with high churn is like racing with a hole in the tank: For sustainable growth, we first need to stop the leak.
NRR drives valuation: Retention and expansion don’t just boost our multiple but change what that multiple applies to.
Retention before expansion: We can’t grow accounts we’re about to lose. Renewals come first.
Value beats features: Customers stay when we solve the pain that made them buy (RFW). Not when we ship more features.
Discounts buy time, not loyalty: Offer them only if expansion potential justifies the drag and when the narrative fits your current mode (DARD).
Price what customers achieve, not what they touch: If we miss to align pricing with value, we might drive retention but lack monetization.
Payback is a pacing strategy: Land fast, activate quickly, and build pricing steps into your onboarding flow.
Not all churn is bad nor final: Segment ICP vs non-ICP, regrettable vs non-regrettable, and voluntary vs involuntary churn. Then frame losses as strategic, not symptomatic.
Control the churn story: If we don’t segment it, frame it, and tie it back to our strategy, someone else will - and they’ll use it against us.
From Series A to Exit: Mastering Metrics
Despite what you may think, the recipe for reaching your next financial milestone doesn’t have to be a black box. In “From Series A to Exit: Mastering Metrics”, we break down what it takes to position your business as an attractive investment - be it for funding or a strategic exit. Each article focuses on a core function critical to your success:
Customer Retention,
Finance,
and People.
In addition to my own experience, my co-authors draw on their success stories from the likes of Uber, Booking, Dropbox, LinkedIn, Just Eat Takeaway, Lightspeed, Miro, EasyPark, Bynder, Squarespace, BlackRock, JP Morgan, Ares, and more.
Mastering Retention Metrics
Joining me for today’s dive into retention metrics is Squarespace’s Stephen Soward.
With close to a decade of Product and Sales experience, Stephen brings a sharp set of monetization strategies from Dropbox, Squarespace, and LinkedIn. He has seen and iterated on some of the best expansion strategies in the industry - both through PLG and Sales-led motions. At Squarespace, he now focuses on monetization across a broad self-serve base, where pricing isn’t just about features but about capturing e-commerce value.
While it’s mostly the Sales Reps who get the glory, it’s the ones retaining and growing existing customer accounts who build the backbone of a scaling business. Today, we’ll break down what great customer retention really looks like - through the lens of both growth and exit. From building a low-hurdle wedge that systematically drives adoption, through increasing usage and layering on expansion revenue (i.e. up-sells), to integration partnerships, cross-sells, and strategic pricing: we’ll take all the best practices to explore how to build successful land & expand strategies.
And when things don’t go exactly as planned (because they rarely do), we’ll touch on how to control the churn narrative before it - in turn - controls the conversation.
Stick, Then Spread: Designing Land & Expand Strategies,
The Metrics That Matter: What Investors & Buyers Actually Look For,
Narrative Control: How to Handle Churn in Due Diligence.
1. Stick, Then Spread
New Logos are Sexy - Retention isn’t
How often have you seen a LinkedIn post announcing a new customer? How often have you seen one celebrating a renewal? Most startups focus entirely on new business growth, while churn quietly eats away at their margins and valuation. Sooner or later, we all face it: we can’t outrun churn. Not with paid ads, not with more AEs, not even with a Series C war chest.
In the current climate, the customer base is likely our main valuation driver. But buyers and investors don’t just care about how much revenue we book - they care about its quality:
Where does it come from?
How long does it stay?
How much does it grow?
And what does it cost to keep?
Investors want to see proof of PMF and future upside potential.
Post Series B, they expect to see proven GTMF and account expansion.
Buyers want to make sure the asset they’re acquiring won’t fall apart post-close - that asset being our customer base and its revenue.That’s why NRR (Net Revenue Retention) has become one of the key metrics driving both funding and exit outcomes. It doesn’t just capture product stickiness but monetization efficiency and long-term revenue durability. Growth from our existing accounts is so valuable because it does three things at once:
It’s more capital-efficient: We’ve already paid to acquire them. Up-sell revenue comes at no additional CAC; price increases come with 100% margin.
”Expansion ARR is your cheapest dollar, and CS is often your cheapest channel” - CJ GustafsonIt’s more defensible: Customers who expand are finding value. Together with increased switching costs, that creates a long-term revenue moat.
It’s more predictable: Strong retention and expansion point to future upside - which is what gets us valued on forward revenue, not just LTM.
Proving Value
Trying to scale a business with high churn is like racing with a hole in the tank. Want to make it to the finish line? First have to stop the leak.
Andrew Chen calls this the traction treadmill: we keep pouring spend into acquisition without solving retention. It doesn’t just stall growth - it burns resources, demoralizes teams, and inflates CAC without increasing value. That’s why we have to begin with retention.But retention doesn’t just start at renewal - it starts the moment a customer signs. Once onboarded, we’ve bought ourselves a window. What happens next determines whether we become a critical part of the workflow or just another tool waiting to get chopped.
The basic ingredient for retaining customers is to keep solving the problem that got them to sign in the first place. That means understanding their RFW (Reason for Win): Why did they buy? What were they hoping to fix? Are we still delivering on that? Can we prove it?
At Convious, that question revealed a bigger problem. When I joined, the team couldn’t differentiate between an objective, a pain point, and a solution. Sales pitched features, CS focused on delivery. But nobody was aligned on the customers’ actual definition of success and what stood in their way.
We had to reset:
The objective is what the client wants to achieve,
The pain point is what’s holding them back,
The solution is what we believe relieves that pain.
That all sounds basic but if we confuse them, the whole journey breaks down. Best case, we struggle to renew or up-sell - worst case, we can’t even land the prospect in the first place. All three are crucial for our expansion strategy: whatever we promised, we need to prove constantly.
Important note: the client’s satisfaction with the solution, then, is not measured by whether we’ve delivered the product or they’ve adopted the feature but by whether they perceive it helped relieve their pain points and got them closer to their objective. If we lose that thread, customers don’t just get frustrated but forget why they bought us in the first place.
Superhuman famously measured this by asking: “How disappointed would you be if you could no longer use the product?” If the answer isn’t “very disappointed”, we haven’t earned loyalty - no matter what onboarding or usage metrics say.A best practice comes from my time at Formitable. We knew exactly what held restaurateurs back from building sustainably profitable businesses (our mission). We didn’t launch deposit payments because customers asked for it. We weren’t solving for feature requests or driving adoption. We were solving for what stood between customers and their objective. Pre-Covid, a restaurant’s Achilles' heel was no-shows: you’d bought the produce, staffed the floor, turned away walk-ins - all to end up with empty tables. That’s the problem we then tackled from both fronts:
reduce the no-show rate by capturing only high-intent guests,
and if someone still didn’t show, make sure the restaurant at least collected EUR 50 for the table.
That problem definition shaped everything including how we measured success: not by how many clients adopted the feature but by whether it reduced no-shows and eventually, improved table revenue and profitability. It also gave Sales and CS a clear story: one that tied product value directly to business outcomes.
Dropbox, then, took it even further: they set up listening posts across the entire org to proactively spot churn-risk.
“We triangulated usage, support tickets, onboarding frictions, and even objection trends in Sales. We constantly checked whether we still delivered the value the customer originally came for. That gave us early warning signs before churn materialized. Don’t wait for NPS or a renewal call to find out something’s broken.”
Stephen Soward - Squarespace, Dropbox, LinkedIn
There’s also something to be said about the type of problem and the frequency with which it occurs. Ideally, we’re solving a real, recurring problem - not just offering temporary convenience. Gorillas and Getir tried to build a business around delivering EUR 3 avocados. It worked when growth capital was cheap and discounts made convenience feel worth it. But once investors started asking about unit economics, prices went up and the value equation broke: “fast” wasn’t enough to justify the price and definitely not enough to build the kind of frequency needed for a sustainable business.
Customers might’ve used it on a hungover Sunday or for a last-minute beer run but those moments weren’t sticky enough to retain them when the discounts disappeared.
Can’t Expand What You Can’t Retain
Pushing past 100% NRR requires us to do both: retaining and expanding existing accounts. But expansion takes more than just keeping customers happy. And here’s a common trap: too many companies try to grow accounts before they’ve earned the right to even keep them.
At Convious, Finance was pushing hard for expansion revenue growth - we needed it to support the next raise. But behind the spreadsheet - in the trenches - we barely managed to keep customers from walking out the door.
Up-sells had stalled, price increases weren’t landing. Then, one by one, accounts started to churn. On first glance, it looked like a product or pricing problem. But once I got into the trenches, I found the root cause lay a lot deeper: customers didn’t see the value. It wasn’t a PMF issue - it was a management one: Sales never truly knew why their prospects signed (RFW), then overpromised on wild solutions. Still without that information, CS then wasn’t reinforcing value and Support couldn’t solve their problems. Nobody had a grip on industry trends, challenges, customer desires, or the original RFW.
So we hit reset. We dropped the spreadsheets and rebuilt from the ground up:
Renewal first: No expansion talk until the account is secure.
Rebuild relationships: CS needed to meet every client in person and act as their internal voice within the company.
Understand their business: We rewrote the Sales playbook to get at real pain points and built knowledge around the industry, our clients, and their challenges.
Prove value constantly: We handheld clients closely in using the product, aligned usage with business outcomes, and reminded them of the results (e.g. with annual performance scans).
Only once retention was locked, we reintroduced price increases and upsells - by then, we had the credibility to make them stick. Within six months, risky accounts became reference clients. We raised prices, launched new features, and rebuilt team confidence from the inside out.
Lesson learned: if up-sells start stalling, don’t just blame Sales, pricing, or the economic climate. Look inward. Most churn isn’t about the product - it’s about getting sloppy with the customer: we stop delivering the value we promised or deliver it, but fail to reinforce it.
“Companies too often ship their org chart instead of a cohesive experience. Teams are goaled and structured around their own functions - not the customer’s journey.”
Stephen Soward - Squarespace, Dropbox, LinkedIn
The result? A fragmented experience that reflects how we work internally, not the value we set out to deliver. Instead, we need to organize ourselves around the customer’s RFW: What did they hire us to do? Then build teams, processes, and objectives around delivering and reinforcing that specific value.
Aligning Pricing With Value
Once the renewal is in hand, we can really start to spin our revenue flywheel: turning retention into revenue growth.
“If usage and - more importantly - value doesn’t map to pricing, we might drive retention but not monetization.”
Stephen Soward - Squarespace, Dropbox, LinkedIn
Account expansion done right means not just pulling out a feature checklist but being smart about pricing our customers’ growth. What value have they gotten? Have we enabled them to overcome their challenges? Have they gotten closer to their objective?
“It all starts with aligning pricing to the value customers actually get - not just the features they touch. At Dropbox, we followed clear signals of more value being unlocked: we’d spot collaboration behaviors like shared folders and inline comments. Then guided users toward tiers built for team workflows.”
Stephen Soward - Squarespace, Dropbox, LinkedIn
The best expansion motions don’t feel like add-ons. They feel like a natural consequence of the value we’re already delivering. More specifically, think along the lines of:
Is my platform powering revenue generation or collection?
Start monetizing it (e.g. rev share, payments, GMV-based pricing).
Examples: Squarespace, Shopify, and Lightspeed launched payments; Convious prices based on its customers’ GMV.Is overall usage increasing?
Gate tiers, expand seats, or shift to volume-based pricing (e.g. API calls or reports).
Example: Dropbox priced by seat, then gated advanced features with usage tiers.Have we started to solve bigger, cross-functional problems?
Price for workflows, not just users or teams.
Examples: AI companies like Builder.io, Make.com, or Pinecone price based on number and complexity of operations, automations, or workflows.Is our platform the system of record? The source of truth for other parts of the customer’s tech stack and the heart of their operation?
Monetize integrations that keep everything in sync (e.g. data flows with CRMs, ERPs, or analytics platforms).
Examples: POS vendors like Lightspeed for restaurants; PMS systems like Mews or Cloudbeds for hotels.Is data storage becoming more significant?
Limit base storage - then monetize retention, archiving, or backup access.
Example: Notion charges for version history and backup access, Figma limits file storage on free and lower tiers, and Dropbox scales pricing by GB stored and historical access.
“Once customers are building businesses (and revenue) on top of your platform, train their staff on your product, or tailor core operational processes around your offering, you’ve got ultimate pricing power and are looking at an open road ahead - passing renewals and renegotiations all the way up to expansion.”
Stephen Soward - Squarespace, Dropbox, LinkedIn
Going Full Circle
Even though retention sets the basis for expansion, it’s not a one-way street. Together, they form a circular motion: a flywheel that gets bigger and more powerful with every turn.
Something I’ve learned early on when building out Lightspeed’s partner ecosystem: When we expand within our customers’ workflows (e.g. through integrations), we’re not just delivering more value - we’re increasing switching costs. We’re making the next renewal easier. We’re feeding the retention loop.
“It’s easy to move a simple website to a different platform. But try migrating your entire e-commerce setup: payments, CRM, inventory, SEO tooling. That’s when our narrative turned from ‘we’re the website builder’ into ‘we can help you run your entire business.’”
Stephen Soward - Squarespace, Dropbox, LinkedIn
Any NRR growth strategy should start with retention. But once we expand, it reinforces the very thing it grew out of: customers stay longer (CLT) and they spend more (ARPA).
2. The Metrics That Matter
CLT and ARPA are the main metrics investors look at when drilling down on the gold standard: NRR growth.
Customer Lifetime (CLT): how long customers stay,
Average Revenue Per Account (ARPA): how much they pay.
The longer they stay, the more revenue we retain. The more they pay, the more we grow. But once improving unit economics is of relevance, investors and buyers break it all down into three fundamental levers that drive our enterprise value:
Retention: do customers stay?
Expansion: do they grow?
Efficiency: is it worth it?
That’s where Payback Period comes in. Together, they measure not just how good we are at keeping customers but whether we’re keeping them long enough (CLT), growing them (ARPA), and doing both efficiently (Payback). That’s what drives sustainable NRR - and the multiples that follow.
A: Retention - CLT
CLT (Customer Lifetime) indicates two things: whether we’re solving a real, recurring problem and how much time we have to monetize it. Both are crucial for investors and buyers. Investors weigh CAC against CLT (and ultimately LTV). Buyers look at their own CAC payback, our ARR multiple, and CLT when deciding whether to build or buy. The core question: how long would we get to monetize this asset?
Imagine a deal at a 5x ARR multiple. The buyer is effectively paying five years’ worth of revenue to acquire our customer base. Let’s say it currently takes them 24 months to earn back CAC on similar customers (i.e. their internal payback period is 2 years).
Weighing a 2-year internal payback against a 5-year acquisition price, the 3-year delta needs to be justified: either through speed, certainty, and cross-sell potential, or through our own NRR benchmarks with proven ARPA growth and strong CLT.And if that number doesn’t look great? We segment our churn - break it into cohorts. Not all lost customers tell the same story and the right narrative starts with the right cut of the data (More on that in the final section below).
B: Expansion - ARPA Growth
ARPA (Average Revenue per Account) growth tells the real story of whether our accounts are deepening - not just sticking. It’s one of the most obvious metrics Product and Customer Success share: are we layering in more usage, more seats, or more workflows over time? Did we realistically anticipate price elasticity?
“Too often, teams only focus on core pricing or obvious up-sells. But in my experience, the real levers for ARPA growth sit across seats, usage, add-ons - even processing fees. We can be creative when layering on revenue.”
Stephen Soward - Squarespace, Dropbox, LinkedIn
But ARPA isn’t always the metric we want to lead with - especially if we’ve landed logos thanks to steep discounts. Since ARPA reflects what we’re actually booking, it can look underwhelming even when the underlying deal value is strong. That’s when I’ve led with ACV (Average Contract Value) instead. ACV captures the full commercial agreement, including deferred revenue or ramped pricing. It’s a better tool for telling the right story when we’re discount-heavy but confident in retention or expansion.
Of course, some founders take it too far. I won’t name names, but I’ve seen discounts booked as “Marketing costs” or even as back-door donations returned to the client. Clever on paper, but to any serious buyer, it’s a red flag. If you’re hiding discounts off the books, you’re not just gaming ARPA - you’re undermining trust.To further separate ARPA growth from new business and existing accounts, buyers often look at {Expansion Revenue as % of New ARR} or {Net Expansion Dollars} (NDR-driven ARR gains; i.e. ARR above 100% retention). It shows how much of our growth is coming from existing customers, not just new wins. Paired with healthy overall ARPA growth (15–25% YoY at Series B+ scale is a good benchmark) it tells investors our accounts don’t just stick but compound.
The ones who can show quickly compounding revenue moat then often get rewarded twice:
with a higher ARR multiple right out of the gate,
and by shifting the valuation lens from LTM to forward revenue.
Say you're doing EUR 15M in ARR today: that might justify a 4× multiple - putting your valuation at EUR 60M.
Now, if we can prove that revenue is sticky - a strong revenue moat with high switching costs - we have reason to push for a 5× multiple instead: you're at EUR 75M.
If your revenue is both sticky and doubles year over year, that same 5× multiple can apply on next year’s projected EUR 30M, bringing you to a EUR 150M valuation.Retention and expansion, therefore, don’t only boost your multiple - in conjunction, they change what that multiple gets applied on.
In line with my point of “retention before expansion”, CLT and ARPA growth usually mature at different points. CLT usually marks the earliest sign of PMF (Product-Market Fit). In the beginning, it’s relatively easy to move the needle: improve onboarding, fix bugs, reinforce the core value. But once we've cleared the obvious hurdles, increasing CLT further gets exponentially harder - churn condenses into edge cases: low-fit customers, support breakdowns, or missing features that only matter to a few. We’ve picked the low-hanging fruit - the rest takes structural change.
Growing ARPA, on the other hand, is tough early on. When we’re still earning trust, usage is shallow, and we may not have enough product depth, it’s hard to monetize meaningfully. But over time, as adoption grows and customers embed our product deeper into their workflows, further monetization gets easier - we’ve earned the right to expand (see above: aligning pricing with value). That’s why I cannot stress enough, that expansion (ARPA growth) can only follow once we’ve mastered retention (CLT).
C: Efficiency - Payback Period
We’ve covered how long customers stay (CLT) and how much they pay (ARPA). Payback Period zooms in on speed: how quickly can we turn a new logo into profit. It’s less about lifetime value and more about time to first value, time to first up-sell, and how quickly our commercial model activates post-sale.
We’ve got two variables we need to optimize for:
CAC: what we need to put in to acquire a customer, and
Payback: how quickly we earn that money back.
We already covered how to optimize CAC for quantity, quality, and efficiency in our GTM articles. The key to recovering CAC efficiently, is to sign customers with a "Land & Expand" approach in mind: we come in with a clear wedge, tee up our Onboarding team for the shortest possible TTL (Time to Live), and equip Customer Success with the context (i.e. objective, pain point, RFW) and tools (e.g. pricing strategy or additional features) to grow the account later on. The faster we get going, the faster the clock starts ticking toward ROI.
“A common mistake I’ve seen across organizations is treating expansion like a post-sale problem exclusively owned by CS. But since expansion starts with who we acquire and how we activate them, upstream teams need to contribute to input metrics and share objectives on expansion.”
Stephen Soward - Squarespace, Dropbox, LinkedIn
That’s why Land & Expand isn’t just a retention play - it’s a monetization pacing strategy. The sooner we can onboard, deliver value, and justify a pricing step-up, the faster we recover CAC - whether that’s expanding seats, nudging into usage tiers, or converting from trial to paid.
Rule of thumb: 12–18 months works for Series A and B. Once we're at Series C, our GTM motion and unit economics should be optimized enough to earn CAC back in under 12 months. Granted, well-funded hyper-growth plays can - temporarily - afford longer payback times.What happens when nobody thinks about payback, I could see at Convious. The team had been signing clients with roadmap promises: crucial features we didn’t yet have and integrations that might take years to build, if ever. Those sales happened for a mix of reasons: wrong incentives, lack of discovery, and plain desperation. But more than anything, it was allowed to happen because no one - not even management - considered the downstream impact on CAC payback, LTV, or revenue forecasting. We spent the CAC. We spent the internal resources. But those customers never activated, never monetized, and just sat there - dragging down all our metrics.
Think it’s time to kick off your own expansion flywheel? Execute those strategies well and your metrics will follow. Want more metrics and examples? Download the Retention Metrics Playbook here.
3. Narrative Control: Churn in Due Diligence
Segment it. Frame it. Tie it back to your strategy.
Whenever investors or buyers ask about churn, everyone tightens up. But churn only really becomes a valuation killer once we let someone else tell the story.
Whether we’re raising or selling, we need to segment churn before it segments our valuation. Buyers and investors will dig into cohorts, pull apart NRR, and ask hard questions about who left and why. If we’re not ahead of that conversation, we’ve already lost it.
That’s where narrative control comes in. It’s not about spinning numbers - it’s about showing we understand our churn, that it was part of the plan (or a phase we’ve since outgrown), and that our core engine is stronger than ever. Done well, churn segmentation doesn’t just neutralize risk, it even reinforces our strategy.
The keywords are non-ICP churn or non-regrettable churn. Do the work to define your ICP, prove retention within it, and show why shedding the rest is part of the plan. Let’s start breaking it down with the most important question:
Is This Even Churn?
Not all churn is final. Not all churn is even churn. Some customers cancel but keep using the product. Others don’t renew but are still in touch. And some come back after months of silence. So before we panic over a churn report, we need to ask: what kind of churn are we looking at?
Here’s how I usually frame it:
Lost: They’re gone, off-boarded, and unlikely to return. Think: a churned customer who signed a multi-year contract with a competitor.
Recovered: They said they’d leave but stayed before ever fully churning. Think: someone cancelled a year up front, then renewed at a discount.
Resurrected: They left, then came back after a gap. Think: someone who actually off-boarded but came back because they weren’t happy with their other choice.
If we’re tracking this properly, we can build a churn probability model - showing how much of our “churned” base has historically been recovered or returned. That doesn’t just soften the story but helps investors understand which churn is real and which isn’t. If we can prove, we’ve resurrected 20% of churned customers within 12 months of leaving, we have a case for discounting 10-20% of our churn.
What Kind of Churn Is It?
Once we’ve established what counts as churn, the next step is to segment it. Not all churn is created equal - it’s on us to make sure investors know that.
1. Voluntary vs Involuntary Churn
Involuntary churn is when a customer disappears due to reasons outside our control:
failed payments,
admin turnover,
company shutdowns,
acquisitions.
“Involuntary churn is often overlooked, yet some of your best recovery rates come from people who didn’t want to leave. A simple heads-up about an expiring card or failed payment can save the customer and the revenue.”
Stephen Soward - Squarespace, Dropbox, LinkedIn
These cases are often recoverable (unless the customer went bankrupt) and rarely reflect poorly on our product or GTM strategy. Some “losses” aren’t true losses - they’re just dormant (see: recovered and resurrected).
2. Non-ICP vs ICP Churn
This isn’t about why someone left - it’s about whether they should’ve been a customer in the first place. Non-ICP churn is a customer base cleanse. These customers dilute our metrics: they suppress ARPA, shorten CLT, eat up support resources, push down NPS, and often leave frustrated - dragging down reviews on their way out.
We don’t want to save them, we don’t regret losing them. And we definitely don’t account for them in our churn numbers. The narrative is: they don’t belong in the portfolio to begin with. Of course, we’ll still take the ARR they brought in but we don’t count the logo churn when they leave. That’s why - by default - we lead with ICP churn when reporting on customer retention.
3. Regrettable vs Non-Regrettable Churn
Here’s where nuance matters. This one is not about whether the customer fit our ICP but whether we intended to keep them.
Regrettable churn: we wanted to keep the client but e.g. failed to deliver on the RFW (Reason for Win).
Non-regrettable churn: even if they fit our ICP, we made a strategic call to let them go. Think: politically sensitive affiliations, ethical concerns, incidents that breached internal trust (e.g. harassment cases), or simply consumption of too many resources.
We can churn an ICP and still consider it non-regrettable. At the same time, we can retain a non-ICP and be happy about it every quarter. It’s not about labels — it’s about strategic clarity.Keeping customers on board might be great for average CLT but the terms can take its toll on our ARPA. Once you’re pushing for NRR growth (e.g. Series B or C), you’ll find not every client is worth keeping.
Sidenote: Discounts
We’ve already touched upon pricing in our Sales article: “It’s not about convincing prospects our price is low, but to make them realize it’s fair for what they actually need.” Granted, I’m simplifying substantially here but - in essence - if a customer isn’t willing to pay full price, they seem to not be getting the expected value from our product. Giving discounts then, only means we’re buying time.
Buying time to grow their usage, show the value, and be in a better place come time to renew again. Most often, however, that’s not how it goes. More often than not, customers renewing at a 50% discount will expect that discount in perpetuity, will continue to lack value, and eventually churn anyways. So before granting any discount, we need to ask ourselves whether it’s worth keeping a client. It’s not just “can we?” - it’s “should we?”.
In (enterprise) SaaS, where margins and switching costs are usually high, a discounted customer with the potential to expand into more seats, features, or adjacent workflows down the road might often be worth keeping. But if we’re retaining non-ICPs never paying full price, blocking up Support resources, and driving our CS and Product folks crazy, it might be time to say “arrivederci”. You won’t hear this often but: some churn is good!
Ask yourself:
Does this client lay within our ICP?
Is their RFW something we’re actively delivering on?
Is there a clear path to deepen adoption and grow monetization?
But there’s more than just future potential. I’ve run Management meetings where renewal decisions were made based on ego, fear, or lacking insights - often assuming as long as we’re retaining a positive blended gross margin, we’d still be making money hand over fist.
Most decisions, however, depend on the context we’re in right now - both on a micro level (the customer) and on a macro level (the organization as a whole). At Convious, we had customers ask for 50%+ discounts. While our gut - and sometimes ego - initially told us not to cave, context mattered. We had to consider overall churn as well as narrative and optics - keeping investor confidence and team morale. Everyone had an opinion - rarely anyone had any data. And we didn’t have a proven and standardized framework to make these decisions.
That’s exactly why I built the DARD framework (drag-adjusted retention decision). If any of this resonates with you, shoot me a message and we can run through it together.
On a micro-level it doesn’t just consider sheer discount and expansion potential, but the resources a customer drains from our organization (drag components). Those are rarely ever quantified and considered in the gross-margin argument.
On a macro-level, it considers the context our organization is in (mode): full-on growth scenario, optimizing unit economics, or gearing up for an exit. Say, we’re about to close a sale based on LTM revenue with an earn-out on migration %, I don’t care about giving 50% discount moving forward - I just want to keep that client.
You’ll come to see that - depending on your situation - a customer might be worth keeping even at 60% discount. At the same time on the opposite end of the spectrum, a toxic client might be worth giving the boot even at 10% discount.
Note: We might be able to afford discounts from a gross margin perspective but we can't forget fixed costs. What looks fine per unit can still wreck our operating margin and significantly delay our path to profitability.Control the Narrative Before It Controls You
The worst churn stories are the ones we don’t tell - because someone else will. When churn is happening, get ahead of it: segment it, frame it, tie it back to your strategy. Whether it’s evolving our ICP, shifting our pricing model, or focusing on expansion-ready customers - our churn story should support that thesis, not contradict it.
Done well, churn segmentation doesn’t just defend our valuation - it reinforces our positioning.
Wrapping Up
From Series B onward, growth isn’t just about adding new logos - it’s about growing the ones we’ve already won. Investors and buyers know this. The question is: can you show it?
From Series A to exit, our numbers are more than a snapshot - they’re a storyline. Whether we’re raising capital or preparing for a sale, our ability to speak to those numbers with clarity, confidence, and context is what turns good metrics into great multiples and separates the ones defending their valuation from those who leave money on the table.
Retention. Expansion. Efficiency. Track them, improve them, and - most importantly - own the story behind them.
Download the Playbook. Or Let’s Make A New One.
Everything mentioned in this article - the DARD retention framework, the Expansion Playbook, the Sales Hiring Plan, and the Profitability Canvas - I share for free - just send me a message. If you ever need help putting any of it into practice, let me know.
I work with founders and investors on two fronts:
Helping businesses become the company they want to be - by improving the actual metrics,
And helping them look like something investors and buyers want to buy into - by sharpening the narrative and positioning.
With years of experience advising entrepreneurs and leading businesses through multiple successful exits, I bring a unique toolkit of frameworks, strategies, and best practices to position you for fundraising or help guide you through a strategic exit.
If you're preparing for a raise or sale, let’s connect.
Coming Up…
This series will help you get each business unit in shape for your next financial milestone. Next up is …
Your customers, product, or brand may trigger an appetite. But your financials can make or break any successful raise or sale. Learn how to fine-tune your spend and unit economics and maintain clean financials to ensure your numbers tell the right story. We’ll also find time to dive into critical profitability metrics like EBITDA Margin, CAC/ LTV, ARR/ FTE, and the Rule of 40.