Many agency owners consider client churn to be negative. “Churn” comes from the SaaS world—where high attrition can end a firm.
A high churn rate seems bad, right? Not always! Client churn can be good for your agency… if it’s intentional and done strategically.
Some agency owners fear churn, saying, “I need more clients to grow.” Instead, I recommend you use churn to your advantage, by pursuing strategic churn.
If you want to grow your agency, you don’t just need new clients… you need bigger and better new clients. Yes, a $10,000 client is more work than a single $2,000 client—but one $10,000 client is much less work than five $2,000 clients.
Grow Profitably via Strategic Churn
I’ve coined a new term to describe this technique: “Strategic Churn” grows agencies by replacing bad, mediocre, or low-paying clients with higher-paying great clients, by attracting a steady pipeline of these new, high-paying clients.
For strategic churn to make sense, one or both of the following likely exist at your agency:
For strategic churn to happen, you need a strong bizdev pipeline—which I describe in many, many other articles. This could take you months or even years—especially if you have a Client Concentration problem.
Ready to change? Let’s look at how to make this happen!
How to Operationalize Strategic Churn at Your Agency
Don’t start firing clients immediately! Specifically, hold off on clients that you feel you can’t afford to lose. If they’re your biggest client, don’t give them an ultimatum unless you’ve got a new client under contract and ready to go. For strategic churn to work, you need a strong business development pipeline with new clients replacing the churned ones, especially with Client Concentration.
It’s easier with small clients. Let’s say you have a client that’s one half of 1% of your revenue yet they regularly want 5-10% of your team’s time. They are a prime candidate for strategic churn, because they’re aren’t paying for the attention they demand. Get rid of them.
During the process of terminating and onboarding clients, your old and new revenue won’t perfectly align—but the goal is to minimize that overlap as much as possible. Ultimately, strategic churn is an opportunity to grow agency revenue without growing client count.
Rank Which Clients to Churn First
You may have read my classic article about ranking clients by tiers in terms of t-shirt sizes. For any client producing less than 1-2% of your revenue (a Client Dilution risk), think about how much attention they’re getting, and whether they deserve to be part of your future. With the “no more than 20 clients” constraint, you’ll always be thinking about which ones to drop next, so ranking is key.
To help, I’ve created a free Client Ranking Tool to help you make those “drop vs. grow” decisions. If a small client doesn’t have future growth potential, it’s probably time to churn them—unless they produce strong profits with truly require minimal effort. And if a big client would be dangerous to lose, you might need to build your pipeline first before you churn them.
Having “The Talk”: Offering Options is Critical
You’ve now ranked your clients and are ready to have the conversation. Providing options is critical, especially if you think you’ll need to fire a client.
The upshot? Adopt strategic churn at your agency—you deserve to grow profitably, without as much stress.
Question: Which client(s) should you Strategically Churn next?