MRR Churn is the percentage of monthly recurring revenue a SaaS business loses from cancellations and downgrades in a given month. It's calculated as lost MRR ÷ starting MRR × 100, and it's a core gauge of retention and business health — the lower, the better.
What is 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 & Downgrades ÷ Total MRR at Start of Period) × 100Monthly recurring revenue churn rate
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
($1,000 ÷ $10,000) × 100 = 10%MRR churn for the month
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.
MRR Churn FAQ
What is MRR churn?
The percentage of monthly recurring revenue lost to cancellations and downgrades in a month — a direct measure of how much revenue is leaking from your existing base.
How do you calculate MRR churn?
Divide lost MRR by your MRR at the start of the period, then multiply by 100. Losing $1,000 of a starting $10,000 = 10% MRR churn.
What's the difference between MRR churn and MRR expansion?
MRR churn is revenue lost from cancellations/downgrades; MRR expansion is revenue gained from upgrades and cross-sells. When expansion exceeds churn, net MRR grows even without new customers.
What is a good MRR churn rate?
For SaaS, monthly MRR churn under ~1% is excellent; mid-single digits is common for SMB-focused products. Lower is always better since retaining revenue is cheaper than acquiring it.
