Episode 68: On Reducing Churn with Joel Hughes, CEO at Right Networks

Apr 25

In this week’s episode of Subscriptions Scaled, we speak with Joel Hughes, CEO at Right Networks.

In the episode, we learn everything from how Joel and his team reduce churn rates to why they chose a specific billing model for their product.

Keep reading to learn more about the episode.

Right Networks

Right Networks helps accounting firms and small businesses to experience the value of being cloud-connected. The team combines their knowledge of accounting and tax applications, innovative cloud technology, as well as a 24/7 US-based support organization to significantly enhance their client's work.

Fundamentally, Right Networks delivers cloud accounting and tax software to accounting professionals in small and midsize businesses and firms.

Right Networks has been around for more than 15 years. Joel has been at the company for about five of those years.

A private equity partner had come to Right Networks just before Joel’s arrival, and he went to the business as a chief operating officer to help scale the business.

Right Networks is the premier cloud solutions provider for accounting and tax professionals in the United States. When you think about small accounting firms, many often think about accounting professionals like controllers or CFO’s at small businesses.

In the business, Right Networks has more than 70,000 customers and more than 230,000 subscribers.

Right Networks is known initially to deliver QuickBooks desktop software in a cloud. Right Networks has added partnerships with tax providers in the last five years. So, it is particularly good at providing a cloud solution for legacy software.

Joel Hughes

Joel started his career as an engineer and coded for a few years. Then he started a consulting business with some friends from college in digital signal processing software for satellite communications.

What’s exciting and fun about subscriptions to Joel is the visibility you can get with a business. The visibility is so much better than when Joel first started selling in his career before he worked in subscriptions.

Joel’s career launched when he ran several startup companies in Boston. These were mainly hardware or software companies.

Next, Joel worked for about five years at a company called Constant Contact. Here Joel observed how the business worked, the company’s metrics, and how it was managed. He learned a lot from the experience. The company had thousands of small business customers, so it was impossible to know every one of them.

In rare cases, Joel and his team would go out and meet customers, but that was more for market research.

While working at Constant Contact, Joel fell in love with having a large customer base and also delivering a software product with value. Joel was interested in learning how to retain a large number of customers.

It was a different type of mentality at Constant Contact compared to other places Joel had worked. It was fun for Joel because you needed to prove value every day and ensure your customers continue to receive value from your product or service on an ongoing basis to grow a good business.

Churn and retention

The topic of churn, and how Joel works to reduce it, is discussed a lot in the episode. Joel and his team are always looking at how to get people up and running quickly on their software, for example.

Joel and his team often make hypotheses about churn and retention. They then make some changes and let it play out for at least a few months. This allows the team to see if their changes affect the churn rate.

Sometimes the team has wrong hypotheses. They might see a symptom and think there’s a problem when it’s not actually the case. This is why it’s essential to test to see if there are any changes in that area.

Joel and his team started a new test in April this year which will probably run for at least three months. This is enough time to collect data to see if the expected changes take place. Patience is key for these types of tests, but the gains are worth it.

Users and customers change over time, so it’s essential to keep testing so the business can evolve. Having a team that’s curious and ready to tweak aspects of the company to make improvements is the best approach.

Billing

Right Networks offers a monthly billing subscription to its customers. However, currently, the business is trying to implement some annual billing.

Many years ago, it wasn’t realistic to ask for an annual fee as it might be too expensive. The view was that small businesses couldn’t afford a yearly subscription fee. As such, Right Networks incorporated monthly billing at an early stage.

Many other subscription companies have moved to monthly billing and offer an annual payment for customers to save some money.

Right Networks currently has partnerships with some other third-party software vendors, and they have annual models. So at present, Right Networks is exploring making changes to its billing system. They’re offering both yearly and monthly subscriptions.

The company also provides endpoint and firewall management and cloud application delivery to accounting firms. It’s a pretty big part of the business, called Cloud Premier. In these cases, Right Networks provides multi-year contracts because the customers literally move everything to them. Right Networks essentially becomes their IT department.

As such, it's a longer sales cycle. The customers want to ensure that Right Networks are still going to be there in years to come.

Multi-year subscriptions are given as contracts or agreements. They are for big-dollar users who want to commit for several years. They are users looking for as much support as Right Networks can offer.

It’s important for Right Networks to have a few different models within the company based on customer needs.

With plenty of experience in subscriptions and software, it’s clear that Joel has much advice to give to those thinking of pursuing a subscription-based model for their product or service.