What churn is and how to calculate it

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Churn is the portion of the base that cancels in a period. To calculate, divide what you lost in the month, into customers or recurring revenue, by what you had at the beginning of the month. Retention is what's left: 100% minus churn. If you started the month with 100 customers and lost 5, the month's churn is 5% and the retention is 95%.

MRR at the beginning of the month

MRR is monthly recurring revenue. Add up every active subscription on the first day of the month.

MRR canceled in the month

Add up the monthly fee for all customers who canceled in the month. If there was a downgrade, include the part that was no longer paid.

Customers at the beginning of the month

Customers who canceled in the month

Count only customers who were already in the base at the start of the month.

MRR expansion in the month (optional)

Upsell and readjustments of customers who were already in the base. Do not include new customers. Fill in to see net retention.

Resultado

Fill the first four fields to see the result.

Formula

Churn = lost in the month ÷ based on the beginning of the month

Revenue retention = 100% - revenue churn

Net retention = (initial MRR - canceled MRR + expansion) ÷ initial MRR

This is the simple model: it looks at a single month and assumes churn stays steady. It works as a first read. To decide, look at several months.

Example

Example: MRR of $50,000 at the start of the month, $3,000 canceled, 200 customers, and 8 cancellations.

Revenue Churn: $3,000 ÷ $50,000 = 6.0%.

Customer churn: 8 ÷ 200 = 4.0%.

Revenue retention: 100% - 6.0% = 94.0%.

Average customer time: 1 ÷ 0.04 = 25 months.

In 12 months, at this rate, around 61% of the base remains (0.96 to the power of 12).

Glossary

MRR: monthly recurring revenue, the sum of active subscriptions.

Churn: the percentage of the base that cancels in a period. Here, per month.

Revenue Churn: the part of the MRR that was lost due to cancellations during the month.

Revenue retention: what's left of MRR after cancellations, not counting expansion.

Liquid Retention (NRR): revenue retention adding expansion from customers who stayed. It can go above 100%.

LTV: the total gross margin a customer generates over the entire time they buy from you.

Frequently asked questions

What is churn?

It is the percentage of customers, or recurring revenue, that you lose over a period of time.It is also called the cancellation fee.

How to calculate churn?

Divide what you lost in the month by what you had at the beginning of the month. For example, 8 cancellations on a 200 customer basis give a churn of 4.0%.

What is the difference between customer churn and revenue churn?

Customer churn counts heads. Revenue churn counts money. If high ticket customers leave, the revenue churn is higher than that of customers, and the opposite happens when low ticket customers leave.

What is Net Revenue Retention (NRR)?

It is the revenue left over from the base at the beginning of the month after adding the expansion and discounting cancellations. Above 100%, the expansion covers what was canceled.

How does monthly churn become annual churn?

Don't just multiply by 12, because churn acts on a shrinking base. With 4% per month, about 61% of customers are left after 12 months, that is, the loss is about 39%.

Are my data saved anywhere?

I don't save the values you type. The calculation happens in your browser. If you click "Copy link", the values are in the URL of that link, so share only if you want the other person to see the same numbers.

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