Peel back the layers to ensure the customers you may be losing are not your most valuable ones.
(Churned MRR - Expansion MRR) ÷ Total MRR Previous Month
Why It Matters
Net monthly recurring revenue churn is important because though a basic churn measurement of percentage of customers lost is important, it does not identify what percentage of overall revenues was lost. This is why percent net MRR churn is important to understanding whether your most valuable customers are leaving your business or growing their investment in your platform. [1]
This is the number that will become negative if the expansion revenue from existing customers starts to outstrip the lost revenue from churn. [2]
When to Measure It
As with your total churn rate, net MRR churn should be measured in the scale and expansion stages of the business. In the earlier phase of establishing product/market-fit, it is more important for founders to build a product that people love and a repeatable and scalable sales process.
Industry Benchmarks
Any results with less than 1 percent of monthly churn is great. However if your number is creeping to more than 5–7 percent annual churn in the expansion stage, it's time to invest in customer success and ensure that your most valuable customers are having a great experience with your platform. [3]
Achieving a net-negative revenue churn is possible and should be an aspirational goal of any growing SaaS company.
Works Cited:
- [1] The Only SaaS Metrics That Matter
- [2] Why Negative Churn Is Such A Powerful Growth Mechanism
- [3] SaaS Churn Rate: What’s Acceptable?
Additional Resources:
- SaaS Metrics: Negative Churn
- SaaS Metrics 2.0 – Detailed Definitions
- What is MRR Churn? | SaaS Metrics FAQs Part 2