According to Jay Abraham’s multiplier perspective, there are three levers you can pull for growth:
When I talk to executives at product-led businesses, most focus almost exclusively on increasing the number of customers; however, when it comes to increasing ARPU or decreasing churn, I hear crickets. This is a huge missed opportunity. According to Tomasz Tunguz, “A healthy growing SaaS company with -5% churn has 73% higher revenue than one with 5% churn.”
If our goal is to increase our revenue, why is everyone looking at the customer count? Drew Sanocki, former CMO at Teamwork.com, found that decreasing his churn rate by 30%, increasing ARPU by 30%, and increasing total customers by only 30% increased LTV by over 100%.
Breaking down your business by three levers lets you quickly identify which levers will help you your business grow fastest. Unless you’re just starting out, reducing churn and increasing ARPU will almost always have the biggest impact. Once you nail your churn and ARPU, you can start multiplying your business with each additional customer.
Here’s the multiplier formula you can use:
Churn > ARPU > # Customers
Want to see how it works? Fill in the graph below to see which lever will have the biggest impact on your business.
Based on these three scenarios it’s easy to see that ARPU is the biggests lever we can pull to grow this business.
<aside> 📌 ARPU
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