In this interview, Patrick Campbell, CEO of ProfitWell, shares findings from the ProfitWell Index, which aggregates data from ~20,000 SaaS companies. He explains that when COVID‑19 hit, the B2B SaaS market experienced a 3‑4‑week period of flat revenue and a noticeable churn spike as customers audited their expenses and cancelled non‑essential services. After that brief shock, new revenue rebounded and churn returned to normal levels. Industry‑specific trends emerged: companies serving physical venues (restaurants, gyms) saw sharp declines, while video‑conferencing, project‑management, and other remote‑work tools surged. Campbell distinguishes two churn categories: strategic churn (product‑fit, customer type, feature set) which accounts for 60‑80% of loss and requires long‑term product work, and mechanical churn (payment failures, suboptimal contract terms, poor off‑boarding) which makes up 20‑40% and is highly actionable. He outlines concrete tactics to curb mechanical churn—recovering failed payments, offering term‑optimization incentives (e.g., free months for annual plans), and deploying salvage offers during cancellation. Finally, he discusses the idea of moving up‑market (mid‑market/enterprise) as a way to lower churn via higher CAC and longer contracts, noting the trade‑offs of building a sales organization and the risk of using up‑market as a churn‑mask rather than solving strategic churn. The conversation provides both macro‑level pandemic impact data and micro‑level retention strategies for B2B SaaS founders and product teams.
Chapters
So you guys have all this data set you talked about, I think it's called the ProfitWell Data Intelligence. Can you share some kind of data points on how COVID has impacted and affected churn and revenue? Specifically for B2B SaaS in the last few months? And are you seeing certain industries that are growing and how much are they growing and others, how much are they shrinking in general?
Yeah, totally. So when COVID hit, we, like every subscription business, 'cause we ourselves are a SaaS company, we freaked out because smart people like you were going on Twitter and half of you were saying, oh, the world's ending, don't expect revenue for 4 years. And then the other half of you were basically saying, everything's gonna be fine in the next 3 months. And whenever you see that, I've learned as an entrepreneur, you have to realize no one's right because no one knows what's going on. So someone may be right, but no one really knows what's going on when you have that phenomenon. And so we came out with something called the ProfitWell Index, which was basically, we took the 20,000 companies on top of ProfitWell who had plugged in their Stripe, Braintree, Zora, or Recurly accounts to get their free metrics and basically looked at, how were different verticals growing or not. And with B2B SaaS specifically, the market as a whole basically like kinda stopped and went flat for a good 3 to 4 weeks. And a lot of us thought that was because people stopped buying. In reality, that's not what happened. Instead, everyone went through their balance sheet and just looked at, what are the things I can cancel? What are the things I can get rid of? And so there was a good amount of churn that happened. But then something really, really fascinating 3 to 4 weeks in happened where everything kind of— I don't want to say got back to normal, but people started acting a lot more normally. And then all of a sudden we just started growing again where new revenue was really good and then churn was kind of normal, if that makes sense. So there was just this initial hit, and I think that hit came from probably what you would expect. You basically saw anything having to do with going outside, if you were helping restaurants, helping gyms, these types of things, they all got wiped. A lot of them were able to recover, which was really great. And then obviously the companies that were doing really well, like the Zooms, project management tools, these types of things were just crushing it. And so we really like to look at that middle group, which we kind of fall into. Like, what are the companies that aren't necessarily getting crushed or aren't necessarily doing really well? What are they doing to do well? And that was really what was really interesting to study.
Hmm, interesting. Yeah, I think that we hear that quite a bit, is that I think repeatedly is that, you know, the smaller SMBs just kind of A lot of them just decided to pause and end it, and a lot of people just lost their bread and butter. But then a few weeks in, then you get started on all these bigger clients coming in and accelerating the growth to make up for it. So that's quite interesting.
I think it's a great opportunity for most brands that are probably involved with you guys, because at the very least, even though things were better than we thought they were going to be, and probably aren't terrible, for better or for worse, among SaaS, I mean, obviously good for all of us, but maybe that's a little weird when the market, other things in the market are doing so poorly and there's, you know, so many unemployed folks. But—
Sure.
I think that one thing that was really kind of fascinating was looking at how all of these companies started kind of attacking incumbents because the one thing that happened is that everyone reconsidered their stack. Everyone reconsidered the software that they're using and they're still considering, right? And all of a sudden it was, hey, maybe not what's gonna bring us more revenue because we just have these expectations that our revenue isn't, you really gonna happen this year, which I think is a not good expectation, 'cause I think everyone's doing actually all right, if not really well. But everyone was looking for, oh, can I save costs with this? Can we do something better? And so the best companies out there, they were taking advantage of this by going to the customers of their competitors and basically saying, hey, like, we'll give you this for free until your competitor contract's up, or we'll give you 2 free months, or we'll do a whole host of things, because everyone was reconsidering it. And it's some— it's a bandwagon you can still hop on.
Right.
But I think it's one of those things that, God forbid another downturn ever happens, it's a really good thing to do when that initially happens.
Makes sense, yeah. So I mean, at the core of your product of what you built was how do you solve churn? I think that was initially why you built ProfitWell. We get a lot of companies that approach us or even in our portfolio companies that we work with, their main focus, B2B focusing on SMBs. And we see double-digit monthly churn rate, especially when you're focusing on SMBs. I get asked this and these are the things we're always learning to try and apply ourselves. What are some suggestions you would start with to help start reducing that monthly churn? Where should we start looking at?
Yeah, the thing to realize with churn is that you have 2 major categories of churn. One category is what I like to call strategic churn and this is essentially the churn that has to do with your product and there's really no tactic to fix this churn. It's about 60 to 80% of your churn depending on the type of business that you're in and how sophisticated your product team's been. This is the stuff that involves building the right features, finding the right type of customer, all these things that you gotta do research and you gotta do— it's not difficult work, but it is work to kind of figure out and kind of vector over time to reduce that churn as much as possible. But I think that what's really kind of fascinating is that there's a 40% or down to about 20%, depending on the business, of churn that I like to call mechanical churn.
Okay.
And this is churn that People don't optimize because they don't spend enough time on retention or pricing. You know, just in general, they're spending all their time acquiring customers, which obviously is something important. But that mechanical churn is actually super solvable. And these are things like credit card and payment failures. 20 to 40% of your churn right now is credit card to payment failures. Like, it's that high. I mean, these are people where, yes, there's a certain portion of them, this is their excuse to leave you in the first place, but you should be recovering, you know, 60 to 80% of those, those people who, you know, have their credit card failed, and you're only recovering probably 20 to 30%, depending on the type of vertical you're in. So that's a huge piece of— it doesn't take a ton of work, but it's one of those things where if you put even the basics in, you can chip away at that problem and reduce your churn overall. Another thing is term optimization. What really frustrates me sometimes is a lot of B2B companies, the only time they ask me to get on an annual plan or a quarterly or 6-month plan is when I sign up, which is before I've even used the product. Therefore, I don't even know if I want this on a quarterly, a 6-month, or annual basis. And so you have to target those people. You should do this algorithmically, but really it's people between 2 months and 9 months of using your product, all things being equal, that you should go out to them and say, hey, you can get a free month for basically an annual plan. Or hey, here's this offer that you can get for that annual plan. And then other aspects of mechanical churn is your offboarding. A lot of people don't realize that once someone clicks that cancel button, there's a lot of things you can do to prevent that cancellation. Yeah. Of course, a lot of people who hit that button are gonna end up canceling, but there's a good 10 to 25% of those who with the right salvage offer, hey, we'll give you an extra month to stick around and fall in love with us. You can use some cheeky copy or just like, hey, like you put that you didn't, you weren't able to get ahold of someone and that's why you're churning. Well, here's a little like Calendly scheduler where you can actually schedule time with someone to talk to them. So there's just a lot of things you can do for that 20 to 40% of mechanical churn that I think not enough people are doing. And I think it's because they're only focused on the strategic churn when obviously the mechanical stuff is a lot easier to solve than what's the right product, who's the right customer.
Yeah, I agree with that. So I like that term, the mechanical churn. It's the first time I've heard about it. Optimizing pricing, I think that's a whole— another question around that, but I wanna also ask about going upmarket. Is that a strategy you've seen SaaS companies look at? Would you consider that mechanical churn? Like say you're focusing SMBs, do you go mid-market? 'Cause obviously they usually stick around longer, right?
Versus SMBs. Yeah. So traditionally you have You know, it's all trade-offs, right? So I think that when you do go upmarket, when you have a higher price product or a longer sales cycle, traditionally your churn is not as bad because you have higher CAC. Essentially, you have a salesperson who's talking them through everything. Maybe they're— you're only selling annual plans. That's what HubSpot did. And your churn is better when you only have annual plans than if you had monthlies, right? And so I think that it's one of those things where going upmarket certainly can help reduce your churn, but it might open up a whole host of other problems, right? Because all of a sudden, it's like building a sales team. Yeah, there's a lot of people who've done it, but it's not easy. It's not something that's terribly hard, it just takes a lot of work. And so I think that what I fear sometimes with people who go upmarket to reduce churn, rather than people who start upmarket, which is a good number of people, is that those people who kind of go upmarket to hide churn, they ultimately, like the chicken comes home to roost as they say, at some point, Because they're gonna have to solve that churn at some point. So your sales team can only help you so much, but that strategic churn, it comes down to you gotta know the right customer, you gotta get the right product, you gotta get the right onboarding, you gotta do a lot of these things that if you're not spending a good amount of time doing, like no amount of tactics are gonna solve for it.
