Why a 4.8% Churn Rate is Tough for B2B SaaS
A look at the numbers behind our pricing strategy and why we abandoned the seat-based model.
When we first built FeedbackFalcon’s business model, our plan was to charge per-seat, matching competitors like BugHerd and Marker.io.
We projected our acquisition rate and assumed an industry-average 4.8% monthly churn rate. The resulting numbers weren’t great.
The math problem
A 4.8% monthly churn rate sounds minor, but it means you’re losing over half your customer base every year. You have to spend heavily on marketing just to maintain flat revenue.
In the agency space, that churn isn’t always driven by dissatisfaction. It’s often driven by the “Seat Tax.” Agencies finish a project and immediately cancel their vendor accounts to avoid paying for inactive freelance seats.
Moving past per-seat pricing
We realized our pricing model was encouraging our best customers to leave.
So we switched to a flat-rate model based solely on concurrent active projects. By allowing unlimited seats, users don’t have to manage licenses when inviting a client for a short QA review.
Our churn rate dropped significantly after the change. Transparent pricing aligned with how teams actually work makes a big difference.