Learn about attrition and the impact that this customer base metric can have on RMR valuations, in this second of a six-part article series.
Each company’s costs to create an RMR customer and the length of time each customer remains performing is critical to determining the value of any customer base. A company’s attrition performance speaks to the strengths of the respective management team and the level of customer care that each base has experienced over time. The rate at which customers cancel or become non-performing (attrition) speaks directly to the longevity of a recurring revenue stream and in turn, the value that is placed on it by the market.
While attrition does not measure the rate of growth of a company, it certainly impacts the net growth rate that the organization is able to maintain. As the saying goes, “It is cheaper to keep a current customer than invest in creating a new one.”