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- If You're Not Losing Customers, You're Not Growing
If You're Not Losing Customers, You're Not Growing
Stephen Moore
February 19, 2024
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Hey readers! Welcome to EH weekly, where you can look forward to insightful lessons and practical takeaways delivered to your inbox every week.
In this week’s edition, we discuss:
Why startups need to lose customers to grow
How to handle redundancies (the right way)
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Not losing customers? Then you’re not growing
Losing customers? That sounds wrong. And like a recipe for a self-fulfilling prophecy.
But, as multi-exit entrepreneur Joe Procopio argues, if you're not losing customers, you're not growing.
Building startups requires letting some of those relationships go while you constantly challenge them and replace them:
The high-growth crossroads — Most customers are with you because they like what you do the longest and the best. But, if your business is not constantly keeping in front of tech advancements (not "keeping up with," but "keeping in front of") your business will either get left behind by a competitor or become a cog in a commodity offering.
Protect your top and bottom line — CAC almost always naturally accelerates, and it's painful to watch them increase. Customer lifetime value (LTV) is also never infinite and almost always decelerates over time. This always creates friction for your current customers. How much friction depends on how confident you are in your growth strategy because you're proactively causing that friction in the name of growth.
You can't grow and not lose customers — If you're not gaining new customers at a multiple of the rate you're losing customers, the growth strategy is flawed and needs to be rethought. If you're gaining new customers and shedding customers already on their way out the door, that just helps your bottom line. So, don't have hard feelings for the ones who leave; instead, mentally thank them on the way out.
👉️ Click here for a deeper dive on firing your customers.
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How to do redundancies the right way
Elon Musk was quoted as having offered three months of severance pay, pointing out that it was 50% more than what was legally required.
Did it stop the anger and complaints? Far from it.
Money is essential and helps rebuild. But money doesn't help with trauma, shock, and the feeling of worthlessness.
When faced with the yawning deficit of a startup's finances, there is a temptation to decide on what needs doing and rush the plan into action immediately.
But rushing doesn't work.
It is easier to fall foul of the law, which can cost substantial amounts. But as importantly, individuals are damaged. The culture goes up in smoke. People you retained for the future feel uncertain of their future, and some people flee elsewhere.
Doing layoffs the "right way" comes down to the why and the how:
Openly consult people if the figures aren't adding up.
Be honest about the outcomes if things don't change.
Remind them what is good and worth fighting for about the company.
Involve them and ask for ideas to save money.
Stop new recruiting.
Upskill across the departments to strengthen versatility.
Be completely transparent; keep an open-door policy.
If people are at risk, tell them where they stand and what money they would get if it came to it. It gives them a chance to make a B plan.
Be clear about your selection process so that there is no chance of anyone feeling no longer "useful" as people. Encourage them, help them, recommend them.
👉️ Head here for more on how to handle redundancies, the right way.