How To Calculate Revenue Churn

10 logo churn versus 92 revenue churn tells two very different stories.

How to calculate revenue churn. I live in the arr world so i am using arr annual recurring revenue in the formula. Revenue churn is the percentage of your mrr lost over a specified period of time. Net revenue churn is more useful than gross revenue churn as it provides a more complete picture of how your revenue relates to your actual customer base. Revenue churn or dollar based churn.

The resulting percentage is your gross revenue churn. Net revenue churn is probably the most important rate of churn you can measure. Revenue started at the beginning of the month divided by the lost revenue in that month. Revenue churn rate assuming it was the 1k mo customer that cancelled would be 1000 1090 or 92 churn.

User churn directly decreases revenue so it is vital to keep it at bay. Same formulas apply but we replace customers with dollars or revenue. To keep things simple we ll just assume you re calculating your revenue churn monthly. Here s how to calculate it.

As before you can choose a different time frame such as quarterly or annual. If customers leave so does the revenue. If you offer a variety of products services at different prices calculate your revenue separately from your customer churn. Churn affects recurring revenue lifetime value and acquisition costs.

Net revenue churn rate. How to calculate churn rate. If you started q1 with 50 000 in total revenue and by the end of q1 you lost 5 000 your gross revenue churn rate would be 10. Started with 30 000 per month and lost 1000 recurring revenue.

The negative revenue churn rate means you actually gained revenue. The churn of income is 3 3. It includes revenue lost from customer cancellations failed charges and downgrades. There are more than a few ways of calculating churn rate but two of the most common are customer churn and revenue churn as we ll see each provides a useful way of looking at customer attrition.

In saas monthly recurring revenue mrr is not only the lifeblood of a company it s also an indicator of long term viability. How to calculate revenue churn. You add up the total revenue ignoring how many customers make up the total revenue. Below you can find one last scenario for revenue churn calculation.

Calculate monthly revenue churn. Customer churn rate customer churn is the most commonly used metric and the easiest to calculate. Also as the example pointed out a major benefit to calculating revenue churn is that it s possible to include upgrade revenue. But if you invoice month to month you can replace arr with mrr monthly recurring revenue in the formulas.

Now for dollar based churn or revenue churn.