MRR Churn

MRR Churn (Monthly Recurring Revenue Churn) is a metric that measures the amount of revenue a company loses in a given month due to customers canceling or downgrading their subscriptions. It’s an important indicator of customer retention and the overall health of a subscription-based business.

How to Calculate MRR Churn

Basic Formula for MRR Churn

MRR Churn = (Lost MRR from Cancellations and Downgrades / Total MRR at the Start of the Period) × 100

Example:

• Total MRR at the start of the month: $10,000
• Lost MRR from Cancellations and Downgrades at the end of the month: $1,000

MRR Churn = ($10,000 / $1,000) × 100 = 10%

In this case, the company’s MRR Churn rate is 10%, meaning it lost 10% of its MRR due to churn in that month.

Why MRR Churn Matters

• Customer Retention: High MRR Churn indicates that the company is losing customers or seeing significant downgrades, which could signal issues with the product, customer service, or competition.
• Revenue Impact: MRR Churn directly affects the company’s ability to grow. If churn is too high, it can cancel out the revenue gained from new customers, making it difficult to achieve net growth.
• Business Health: Keeping MRR Churn low is essential for maintaining a healthy, growing business. It’s often cheaper to retain existing customers than to acquire new ones, so reducing churn can improve profitability.

MRR Churn vs. MRR Expansion

• MRR Churn: Focuses on the revenue lost due to cancellations or downgrades.
• MRR Expansion: Measures the additional revenue gained from existing customers upgrading or buying more. Ideally, a company wants its MRR Expansion to exceed its MRR Churn, leading to positive net growth in MRR.