Revenue churn
REV-uh-noo churn
The percentage of recurring revenue lost from cancellations and downgrades in a period. Measures the dollar impact of attrition.
Revenue churn is the percentage of ARR or MRR you lost from customers who cancelled or downgraded. If you started the month with $1M in MRR and lost $30k from cancellations and $10k from downgrades, your gross revenue churn is 4%.
Revenue churn is more important than logo churn because it directly impacts growth math. If your revenue churn is 2% monthly (24% annualized), you need to generate 24% in new and expansion ARR just to stay flat. That is a treadmill. At 0.5% monthly (6% annualized), the math gets much easier.
The best SaaS companies get gross revenue churn below 1% monthly. Some achieve negative net revenue churn, meaning expansion from existing customers exceeds losses from cancellations and downgrades. At that point, your existing customer base grows on its own.
Examples
Monthly churn review at a mid-market company.
Starting MRR: $500k. Churned MRR: $12k. Contraction MRR: $3k. Gross revenue churn: ($12k + $3k) / $500k = 3%. That annualizes to about 30%. This is too high.
An enterprise company with very low churn.
Starting ARR: $50M. Annual cancellations: $1.5M. Annual downgrades: $500k. Gross revenue churn: 4% annually. Combined with $8M in expansion, net revenue churn is negative 12%.
A startup identifies its churn problem.
Revenue churn is 5% monthly. The team segments it and discovers 80% of churned revenue comes from customers who never completed implementation. They invest in onboarding and reduce churn to 2% within two quarters.
In practice
Read more on the blog
Frequently asked questions
What is the difference between gross and net revenue churn?
Gross revenue churn counts only losses (cancellations plus downgrades). Net revenue churn subtracts expansion revenue from the losses. You can have 5% gross churn but negative net churn if expansion exceeds 5%.
What is an acceptable revenue churn rate?
Below 1% monthly (12% annual) for SMB. Below 0.5% monthly (6% annual) for mid-market and enterprise. The best SaaS companies achieve negative net revenue churn through expansion.
Related terms
The percentage of customers (logos) you lose in a period. Counts customers, not dollars.
The rate at which customers cancel or do not renew. Measured as logo churn (customers lost) or revenue churn (dollars lost).
The percentage of revenue retained from existing customers before counting expansion. Measures pure customer stickiness.
Additional revenue from existing customers through upsells, cross-sells, and increased usage. The engine of net-negative churn.
The percentage of revenue retained from existing customers after expansion, contraction, and churn. Above 100% means you grow without new sales.
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