3 min read
If you google SaaS churn you’ll quickly find nerdy blog posts that make you confused and bored about the topic before you get to the actual definition. Good thing for you, the definitions and examples in this post on how to calculating SaaS churn are easy.
Before you start, know this (!) when it comes to calculating SaaS churn the thinking is that that the more clients, revenue, and products you have, the more sophisticated analysis you need (cohort). But for startups (one or two products and a few hundred clients) you’ll do fine with the following metrics.
Planhat customers, don’t read this if you’re bored, spend your time closing business instead – whenever your investors (or boss) comes asking you for your churn, just go to the reports tab and pull the report.
For everyone else, we this blog post will help you define the following metrics for SaaS churn:
Net MRR Churn
Customer churn is defined as: # of customer that churned / total # of customers
Example: You have 100 customers, 10 of them are up for renewal this month, 2 of them churn
Your churn is: 2%
Easy! You have 100 clients and 2 left you.
You could also say:
My customer churn on this months Renewal Base was 20% (2 out of 10)
Revenue churn is defined as: lost revenue as a percentage of total recurring revenue:
Example: You have 100 customers, all of them pay $12,000 for a 12-month subscription (MRR of $1,000), 10 of them came up for renewal this month, 2 of them churned
Churned MRR / MRR @ start of month
Your MRR churn in this example is 2%
Churned MRR = $2000 / total recurring revenue = $100,000
Just like before, you could also say that your Revenue churn on this months renewal base was 20%:
$2000 (churned MRR) / $10,000 (MRR value of clients coming up for renewal this month)
Net Revenue churn is defined as: Churned MRR – MRR of upsales* / total MRR @ start of month
Same example: You have 100 customers, all of them pay $12,000 for a 12-month subscription (MRR of $1,000), 10 of them came up for renewal this month, 2 of them churned and 8 of them renewed, you up-sold one of the eight with $3000 (MRR)
*upsales could be any up-sale, cross sales or any price increase on existing subscription
In the above example, your Net Revenue Churn or Net MRR churn is
$2000 (churned MRR) – $3000 (MRR of upsales) / 100,000 (total MRR @ start of the month)
-1% (negative churn...which is a good thing!)
You could also say that your Net MRR Churn this month was -10%
$2000 (churned MRR) – $3000 (MRR of upsales) / 10,000 (MRR @ start of the month for clients coming up for renewal)
There is it! Now you know the definitions of the most basic churn metrics in SaaS.
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