Revenue Churn
What is Revenue Churn?
Revenue churn measures recurring revenue lost from an opening customer cohort through cancellations and downgrades. Gross revenue churn counts those losses; net revenue churn also offsets them with expansion from that same cohort.
Revenue churn answers how much recurring revenue the existing customer base lost during a stated period. It weights customers by the dollars they contribute: one large account can matter more than several small accounts. Always say whether the number is gross, which shows losses alone, or net, which subtracts expansion from those losses.
Also known as: ARR Churn, MRR Churn
Formula
Gross Revenue Churn = (Churned MRR + Contraction MRR) / Opening MRR | Variable | Meaning |
|---|---|
Churned MRR | Recurring revenue lost when customers in the opening cohort cancel. |
Contraction MRR | Recurring revenue lost when opening-cohort customers downgrade. |
Opening MRR | Recurring revenue from the fixed customer cohort at the start of the period. |
How to use it
- Fix the paying customer cohort and its MRR at the start of the month. Use the same opening balance and reporting period for every movement; do not add new-customer revenue to this cohort.
- Sum MRR lost when opening-cohort customers cancel and when they downgrade. Divide that sum by opening-cohort MRR for gross revenue churn. Count downgrades even when the account remains active.
- For net revenue churn, subtract expansion MRR from those existing customers before dividing by opening MRR. Exclude reactivation MRR, explain material currency changes, and reconcile the movement totals to a subscription ledger.
Worked example
Hypothetical worked scenario
A fictional product starts April with $80,000 MRR from its existing customers. During April, cancellations remove $3,000 MRR and downgrades remove $1,000 MRR. Other accounts in the opening cohort add $5,000 MRR through upgrades.
Gross revenue churn = ($3,000 + $1,000) ÷ $80,000 = 5%. Net revenue churn = ($3,000 + $1,000 − $5,000) ÷ $80,000 = −1.25%.
The negative net rate means expansion more than offset losses in this cohort. It does not mean no one left: $4,000 of starting MRR still disappeared. Revenue from customers acquired in April belongs in a separate new-business movement.
What the result tells you
Read gross churn to identify the amount of recurring revenue at risk before upsells cover it. Read net churn to see whether the opening cohort grows after expansion. Pair both with customer churn to learn whether losses are concentrated in a few large contracts or spread across many small accounts. Segment by plan and customer size before choosing a retention response.
Assumptions and common mistakes
- “Revenue churn” without “gross” or “net” is ambiguous. Define the numerator before comparing a reported rate with another company or period.
- Do not divide monthly MRR losses by annual ARR, or mix monthly customer churn with quarterly revenue churn.
- Contraction is a revenue loss even when no account cancels. New customers must not offset losses inside an existing-cohort churn rate.
- A negative net revenue churn rate can coexist with a serious account-attrition problem. Inspect the gross losses and customer count as well.
See a worked MRR reconciliation, from opening to closing MRR, with a downloadable ledger.
Compare related measures
Frequently asked questions
Can gross revenue churn be negative?
No. Under the gross definition used here, cancellations and downgrades create a zero-or-positive loss rate. Net revenue churn can be negative when expansion from the opening cohort exceeds those losses.
Is a downgrade customer churn?
No. The account remains a customer, so it does not add to the lost-account count. Its reduction in recurring spend contributes to gross revenue churn.
Sources and methodology
The references below explain the underlying methods. Our worked scenarios use hypothetical figures; they are not company results or current market benchmarks.
- ChartMogul: Revenue churn (net and gross revenue churn rate)
Gross and net MRR churn formulas, the fixed opening revenue base, and the distinction from customer churn.
- Stripe: How to track, understand, and reduce gross churn
Cancellations and downgrades in gross revenue churn, contrasted with lost customer accounts.
Found an error or a definition that differs from your reporting? Send a correction with the page URL and the method you use.