How to Calculate Client Retention Rate

I'm gonna come on with a quick video to answer the question, how do I calculate my client retention rates? And if you're thinking this question, you run a digital marketing agency, you're thinking in the right lines. I know one of the biggest struggles we face as digital marketing agency owners is client churn, right? I think there's one of the most painful feelings in the world is when a client reaches out and says, hey, they need to cancel. They need to pull the plug, they need to go a different direction for a variety of reasons, right? Because we put so much energy into getting them as a client, we put so much energy into really serving them, right? Whether it's setting up the website, doing the SEO, doing the pay-per-click, running the Facebook ads, doing the tracking, trying to split test and do everything we can to generate results. And so when the client raises their hand and says, "Hey, look, I'm sorry, this didn't work out. I'm gonna go a different direction," that hurts. Just type in the comments, That hurts if you feel that way when a client cancels. I know that I do. And you know, there's lots of things you can do as an agency owner to curb that outcome. Like there's gonna be clients that cancel regardless. That's par for the course. But there are things you can do to improve your retention rates. Either, you know, with the experience that you create, the way that you communicate, the value that you bring to the table, getting better at the results that you actually deliver. And there's a place to talk about that, and I've got great training that walks you through how to maximize client retention. But on today's session, on this quick video, I want to talk about how to track retention rates. So there's a very famous quote, and I found this to be extremely true in my life. It's that what you measure improves. What you measure in any aspect of your life, right? If you're thinking, you know what, I put on some pounds, I can see the weight coming here on my chin, I'd like to lose some weight. When you start to measure how much you weigh, what your body fat level is, and you track that on a daily basis, or weekly basis, or monthly basis, what happens? You start to pay more attention to it. And when you pay more attention to it, you start eating better, you start making better choices, and the weight goes down, right? I know this is true in almost every aspect of life, whether it's your fitness, whether it's your sales, whether it's your wealth and kind of your net worth accumulation. What you measure and track always improves. And so I want to give you guys the formula for measuring your client retention, right? If you're not tracking this today, this is something you absolutely want to do over time, right? Because you need to know what that number is. Are you doing well? Are you doing bad? Are you losing more than you should, right? And then you also want to track that because as you track it, you can make adjustments. You can do things to improve it. So let me— and I've got this formula up, right? And it's, it's basically the number of customers at the end of a period. So let's say you're looking back this month versus last month. How many clients do you have at the end of this month? So let's say April's coming to a close. How many clients? We also need to know the number of new customers that we acquired, right? How many new clients do we get? Did we get 5 clients? Did we get 9 clients? And then we need to know the number that we started with. So I'm gonna give you guys a simple Excel formula for this, which will make this a lot more practical, but it's good to know what the formula is. Because when we've got these 3 things, we can figure out— we're interested in the number of customers remaining at the end of the period without counting the new customers that we acquired, right? If you don't take into account the new customers, your retention's gonna seem better, 'cause it's like, oh, we have 100%, but the reality was you landed 5 and you lost 4, so Clearly your retention was not 100%. So that means we've got to divide the remaining— would be the number that we started with minus the new— to calculate our retention percentage, which gives us the formula CRR, client recurring revenue, client retention rate, is E minus N divided by S times 100. So, um, that's the formula. It's a little bit complex. Let me share with you a simple sheet This came up in our group earlier today, so I figured as I'm putting this resource together, I think this would be great for the rest of you guys to benefit from. Because when you start to measure it, you can start to make decisions and changes. And so in the comments here, I've— or in the description, I've got a link to these two tracking documents. I've got the simple client retention tracking, which is just going to help you say, you know, this basic formula. And then I've got what we call our sales retention tracking sheet, which is a, a mechanism we use to track monthly retention rate in addition to how many new clients did we sell, how many clients did we lost, and track that retention rate over time. So give me one if this is helpful to have these sheets and to kind of have a mechanism to more tightly monitor your retention going forward. Uh, all right, so let me just walk you through how this works. Ultimately, let's say I wanted to look at retention for the month. Or a quarter, or for so far this year, for the last year, you would just need to plot these numbers in. So as an example, let's say at the start of the period, so let's say we started April with 75 clients, uh, we sold 15 new and we lost 9. Basically what this is going to do, it's going to add the, the 75 plus the 15 minus the 9, and that's how many we have at the at the end of the period. So basically we started with 75, we ended with 81, but we also sold 15 and lost 9. Gives us an 88% monthly retention rate. So this is just a simple calculation. Um, I like to look at retention in terms of monthly average retention rate. Um, the longer this spans, like if you're looking at a quarter, if you're looking at a year, Probably the harder to be above 90% in, in like average retention. So what I like to do more, more likely is what would be on this sales retention tracking sheet. And if you jump to the sales retention tracking, basically this gives you the mechanism to set a goal. How many clients will we sell? How much will those clients be worth? How many clients do we think we're going to lose? How much are those churn numbers going to cost us? And then it helps you to calculate what that retention rate is here in the actuals. So the way this works is you would put in any new clients that you sold for the period, any clients that you lost for the period, the value of those losses. This is really powerful, you know, just having a mechanism to say, here's my goal, here's the target that I'm shooting for, track those throughout the, the week, throughout the month. So you can see at the end of the month, my goal was to sell 4 and we sold 6. Hooray! The goal was to lose no more than 1 and and we didn't lose any. Yay! Right? So this just helps you really track that towards your annual goals and targets, but it also has this built-in mechanism to help you really monitor what your actual retention rate is on a month-over-month basis. So hopefully this is helpful. If you have any questions on this, put them in the comments. If this is useful, if you feel like, hey, good, I know I need to monitor this, I just didn't quite know how to run this the formula or how to track it correctly, now you've got this as a— these two basic mechanisms. You can either run the simple one on a monthly or quarterly basis just to see where you sit, or you can run the more complicated one and really track that on a monthly basis. You really know what your goals are, targets are versus actual, what your retention rate is. I found that to be extremely powerful for agencies in growth mode. Uh, so let me know what you think, thoughts are. If you, if you have follow-up questions, post them in the comments. Also, if you'd like some more detailed training on how to improve your client retention, right? Well, the things you can put in place to create a better experience, to retain your clients at a high level, just put retention training in the comments. Uh, and that will trigger me and my team to reach out and get you a link to a, a deep dive training I did on how to maximize client retention. So that's it for now. Hopefully this has been helpful. Let me know what you think in the comments. Post retention training if you'd like access to that specific resource, and I look forward to talking with you soon.