Wednesday, December 10, 2025
Churn White Paper
Churn Analysis Case Study
- A private equity firm had recently acquired an ownership stake in a portfolio company that provided a software solution for HR, payroll, and benefits management. Upon acquisition, the portfolio company’s founders remained in senior leadership roles and retained substantial equity ownership, while the investors took on advisory roles as members of the board.
- To improve the portfolio company’s performance, a key objective of the private equity company was to reduce customer churn. Over the course of the first year of ownership, the portfolio company had lost accounts representing 17% of their annual revenue. The founders of the portfolio company had five major hypotheses as to why customers were leaving, but the board needed empirical data to make informed decisions.
- Anova’s independent research validated the hypothesis, uncovering that the product’s lack of basic functionality was severely underestimated as the main churn driver, while other areas were not as impactful in client departures.
| Churn Hypothesis | Outcome |
| Product not meeting customer demands | Underestimated: Gaps in product functionality cited as departure reason by 92% of respondents |
| Increased competition | Overestimated: Less than 10% of departures were initiated by competitor outreach |
| Legacy service model issues | Overestimated: Client service was actually cited more as a strength than area for improvement |
| Negative influence of indirect sales | No impact: No noticeable difference in feedback from partner-sold customers |
| Churn was from non-“sweetspot” verticals | No impact: No noticeable difference in feedback from different verticals |
- “The research gave us unvarnished insight into our customer base. There was little of what was said by management that proved to be true. It helped us with our planning going forward. When a firm conducts their own client satisfaction survey, win/loss analysis or departed client interviews, too often these clients will say whatever is necessary so as to not hurt feelings. We needed Anova’s objective approach to truly understand what was going on.” – Private Equity Associate, Client Company Board Member
