Negative Churn Rate

Negative Churn Rate Meaning

A negative churn rate occurs when the revenue gained from existing customers (through upgrades, add-ons, or expansions) exceeds the revenue lost from customers leaving or downgrading.

So, even after some customers leave, the overall revenue from existing customers still increases. This phenomenon is also known as “revenue expansion” or “negative revenue churn.”

Negative Churn Rate Calculation

To figure out the negative churn rate, businesses need to:

1. Subtract the money gained from existing customers (from upsells or cross-sells) from the money lost due to customer churn.
2. Divide that result by the total revenue at the beginning of the period.
3. Multiply by 100 to get a percentage.

For example, a SaaS company started the month with $2 million in monthly recurring revenue (MRR), lost $40,000 because of churn, but gained $80,000 from upsells and expansions.

Their negative churn rate would be -2%.

Negative Churn Rate = [($40,000 – $80,000) / $2,000,000] x 100% = -2%

This negative churn rate of -2% shows that the business isn’t just holding onto customers but also making extra money from them, boosting growth and profits.