# Q2 2026 Board Review: Customer Retention **Vellum Analytics | Board Meeting April 15, 2026** **Prepared by:** Yuki Tanaka, Senior Data Analyst --- ## The Headline **We're losing $1.67M in ARR to preventable churn — and we know exactly where to fix it.** Q2 churn rose 18% quarter-over-quarter. But this isn't a market problem or a product-market fit problem. It traces back to three operational decisions we made in Q1 — all of which are reversible. --- ## Where We Were Coming out of Q1, the business was healthy: - **$34M ARR**, tracking toward our 50% YoY growth target - **5,700 customers** across three tiers - **108% net revenue retention** — expansion was outpacing contraction - Churn steady at **5.2%**, in line with B2B SaaS benchmarks We had momentum. Series B capital was deployed. Growth levers were being pulled. --- ## What Changed Three things happened in quick succession at the end of Q1: | Decision | Rationale | Unintended Consequence | |---|---|---| | Redesigned onboarding from guided wizard to self-serve | Scale faster, reduce support load | Less-technical users lost; activation fell 12% | | Lowered paid acquisition CPA targets | Hit volume goals for growth | Brought in lower-intent customers who churn at 2x the rate | | Lost 2 support reps to attrition (not yet replaced) | — | Response time doubled from 2.1 to 4.7 hours | Each decision made sense in isolation. Together, they created a compounding retention problem: we attracted less-qualified customers, gave them a harder onboarding experience, and then couldn't help them when they got stuck. --- ## The Impact ### Key Metrics: Q1 vs Q2 ``` Q1 2026 Q2 2026 Change ─────── ─────── ────── Churn rate 5.2% 6.1% +18% Onboarding activation 68% 60% -12% Time-to-first-value 6.3 days 9.1 days +44% Support tickets (30d) 1,840 2,510 +36% Net revenue retention 108% 101% -6.5pp ``` **347 customers churned in Q2, representing $1.67M in annualized revenue.** ### The Trend Is Accelerating Monthly data shows this isn't stabilizing — it's getting worse: ``` Month Churn Rate Activation NRR ───── ────────── ────────── ──── Jan 5.0% 69% 109% Feb 4.7% 70% 110% ← Q1 baseline Mar 5.7% 65% 106% ← changes ship Apr 5.7% 63% 103% May 6.1% 59% 100% Jun 7.1% 57% 99% ← NRR below 100% ``` **June's NRR dropped below 100% for the first time.** We are now contracting — losing more revenue from existing customers than we gain from expansion. If this trend continues into Q3, we project churn reaching 8-9% by September, putting an additional $2-3M ARR at risk. --- ## The Root Cause: Onboarding Is the Lever The data points to one dominant variable: **whether a customer completes onboarding determines whether they stay.** ``` ┌─────────────────────────────────────────────────────────────┐ │ │ │ COMPLETED ONBOARDING DID NOT COMPLETE │ │ │ │ ┌──────────────────┐ ┌──────────────────┐ │ │ │ │ │ │ │ │ │ 3.1% churn │ │ 11.4% churn │ │ │ │ │ │ │ │ │ └──────────────────┘ └──────────────────┘ │ │ │ │ Customers who complete 3.7x higher churn │ │ onboarding churn at for customers who │ │ BELOW industry avg don't complete │ │ │ │ 62% of all Q2 churned customers never finished │ │ the onboarding checklist. │ │ │ └─────────────────────────────────────────────────────────────┘ ``` This isn't about product quality. Customers who get through onboarding love the product. The breakdown is in the bridge between signup and value. ### Where It Hits Hardest **By tier** — Starter is the epicenter: ``` Tier Churn Onboarding ARR at Risk Completion ────────── ───── ────────── ────────── Starter 9.8% 47% $420K Growth 5.3% 71% $680K Enterprise 1.9% 94% $570K ``` Starter customers — our highest-volume tier — have the worst onboarding completion and the highest churn. These are the users most affected by the shift from guided wizard to self-serve. **By acquisition channel** — Paid is the weak link: ``` Channel Churn Onboarding Completion ──────────────── ───── ────────── Partner referrals 3.1% High Organic / SEO 4.2% Moderate Paid (Google Ads) 8.9% 41% ← 2x organic churn ``` Lowering CPA targets filled the top of the funnel with customers who were never likely to succeed with self-serve onboarding. --- ## The Recommendation We recommend a **90-day retention sprint** with three targeted interventions, prioritized by expected impact and speed to deploy: ### 1. Restore Guided Onboarding for Starter Tier **Impact: High | Timeline: 2 weeks | Cost: Engineering time only** Reintroduce the guided wizard for Starter customers as an A/B test. The previous flow still exists in the codebase. Target: return Starter activation from 47% to 65%+ within 60 days. ### 2. Hire 2 Support Reps Immediately **Impact: High | Timeline: 4-6 weeks | Cost: ~$180K/year** Bring response time back under 3 hours. Data shows customers who wait >4 hours for first response churn at **2x the rate**. Two hires restores Q1 coverage levels. ### 3. Raise Paid Acquisition CPA Floor by 20% **Impact: Medium | Timeline: Immediate | Cost: ~15% fewer paid leads** Accept lower volume in exchange for higher-quality customers. Redirect savings toward retention programs. Paid customers currently churn at 8.9% — double organic. Fewer, better customers is the better investment. ### 4. Launch Day-7 Proactive Outreach **Impact: Medium | Timeline: 3 weeks | Cost: ~$25K (tooling + CSM time)** Automated check-in at day 7 for any customer who hasn't completed activation. Early intervention before disengagement becomes churn. --- ## The Financial Case ``` Conservative Optimistic ──────────── ────────── Q2 churn revenue loss (actual) $1.67M ARR $1.67M ARR Projected Q3 loss WITHOUT action $2.2M ARR $2.8M ARR Projected Q3 loss WITH action $1.1M ARR $0.8M ARR ────────── ────────── Estimated ARR saved $1.1M $2.0M Total investment required ~$250K Payback period < 90 days ``` **For every $1 we invest in retention, we protect $4-8 in ARR.** --- ## The Decision for the Board **Should we shift a portion of Q3 budget from acquisition to retention?** Our recommendation: **Yes.** The data shows that our current acquisition spend is generating customers who churn at 2x the organic rate, while our retention infrastructure — onboarding and support — is under-resourced. Rebalancing $250K from acquisition to retention protects significantly more ARR than that same spend would generate in new logos. This is not a pivot away from growth. It's fixing the foundation so growth compounds instead of leaks. **Proposed next steps:** 1. Approve the 90-day retention sprint ($250K reallocation) 2. Engineering to begin Starter onboarding A/B test by April 22 3. Hiring req for 2 support reps opened this week 4. Paid acquisition CPA floor raised effective May 1 5. Progress review at June board meeting with 60-day results --- *"The fastest way to grow is to stop losing what we already have."*