What is Revenue Churn?
Formula
Gross Revenue Churn = (Churned MRR + Contraction MRR) ÷ MRR at Start of Period × 100
- Churned MRR
- Recurring revenue lost to full cancellations, entered as a positive magnitude
- Contraction MRR
- Recurring revenue lost to downgrades and seat reductions on customers who stayed
- MRR at Start
- Monthly recurring revenue from the customers you had on day one. New-customer MRR is excluded entirely
Worked example
A business starting April with $42,500 MRR, which also adds $6,200 of new-customer MRR during the month.
| Step | Value |
|---|---|
| 1MRR at start of April | $42,500 |
| 2MRR lost to cancellations | $1,250 |
| 3MRR lost to downgrades | $900 |
| 4Gross MRR lost | $2,150 |
| 5Expansion MRR from surviving customers | $3,100 |
| 6Gross revenue churn ($2,150 ÷ $42,500) | 5.06% |
| 7Net revenue churn (($2,150 − $3,100) ÷ $42,500) | −2.24% |
| 8New-customer MRR (excluded from both) | $6,200 |
Result
Gross revenue churn is 5.06% and net revenue churn is −2.24%. The existing base grew by 2.24% on its own, while still leaking just over 5% of its revenue — two true statements about the same month that a single headline number cannot carry.
Gross and net answer different questions
Gross revenue churn measures leakage: how much of the revenue you started with walked out, before any credit for growth elsewhere. It is bounded at zero on the good side, so it cannot be rescued by a strong upsell quarter, and that is precisely its value — it is the only churn figure that expansion cannot hide.
Net revenue churn measures the net trajectory of the existing base and is expansion-inclusive. Below zero is the desirable state: the customers you already had are worth more this month than last, with no new acquisition involved. It is the mirror image of net revenue retention — NRR is simply 100% minus net revenue churn.
Report both. A business at 5% gross and −2% net is growing its base while still losing a twentieth of it every month; if expansion ever slows, the leak is immediately visible in the top line. A dashboard showing only the net figure would have called that month unambiguously good.
New customers never belong in the denominator
This is the most common implementation error in the metric. Revenue churn asks what happened to the revenue you already had, so both the numerator and the denominator are restricted to the opening cohort. Including new-customer MRR in the base makes churn fall automatically whenever acquisition accelerates, which means a good sales month can mask a worsening retention problem indefinitely — and the masking is strongest exactly when growth is fastest and scrutiny is lowest.
Why revenue churn and customer churn disagree
The gap between the two is diagnostic, and the direction matters more than either level.
- Revenue churn above customer churn — your larger accounts are leaving. Losing one $4,000 customer and one $40 customer is 2 logos, but 99% of the revenue loss came from one of them. This is the more dangerous pattern and the one that shows up late in a logo-only dashboard.
- Revenue churn below customer churn — you are losing small accounts and keeping big ones. Often healthy, sometimes a sign that your entry-level plan attracts the wrong buyer.
Track them together with logo churn. Either alone is half a sentence.
Where contraction ends and churn begins
A customer who drops from fifty seats to five has contracted. A customer who drops to zero has churned. The boundary needs a written rule in three cases that come up constantly: a downgrade to a free tier, a 100% discount coupon applied to a paying account, and a customer who goes delinquent and is eventually written off. Each is defensibly either contraction or churn.
The rule matters less than its stability. If the classification of free-tier downgrades changes between quarters, the churn series has a step in it that no amount of commentary will unpick. Bastle's metrics engine treats these as explicit workspace policies — the delinquency window, whether a 100% coupon counts as churn, how trials are handled — rather than as fixed behaviour, so that the choice is visible and can be restated across history instead of being discovered in a footnote.
Discounts, refunds and currency
Three quieter distortions. A discount expiring is an expansion event even though the customer did nothing; a discount being applied is contraction on the same logic. Refunds and credits are not churn — they are adjustments to revenue already recognised, and routing them through churn corrupts a retention metric with a billing dispute. And for a business billing in several currencies, exchange-rate movement will show up as contraction and expansion unless MRR is held at a fixed rate; a bad month for sterling should not read as a downgrade wave.
Where Revenue Churn goes wrong
- Including new-customer MRR in the denominator. Revenue churn then falls whenever acquisition speeds up, which lets an accelerating sales quarter conceal a worsening retention problem for as long as growth holds.
- Reporting only net revenue churn. Expansion from a handful of large accounts can hold the net figure comfortably negative while gross leakage climbs underneath it, and the collapse only becomes visible when expansion pauses.
- Passing churned and contraction MRR into the formula as negative values. Waterfalls usually store them signed, and feeding them in unchanged flips the metric's sign in a way that often looks plausible enough to ship.
- Treating refunds and credits as churn. They adjust revenue already recognised rather than reducing the recurring base, and mixing them in makes a billing dispute look like a retention event.
- Letting exchange-rate movement flow through as contraction and expansion. Hold MRR at a fixed rate for metric purposes, or a currency swing reads as a coordinated wave of downgrades.
- Changing the free-tier or delinquency classification mid-series. The resulting step change in churn is indistinguishable from a real deterioration once the reason has been forgotten.
Related
Metrics that move with this one
No metric explains a business on its own. These are the figures that qualify, offset or explain Revenue Churn.
Churn Rate
Churn rate is the share of customers or recurring revenue lost over a period, most often calculated as the number of customers who cancelled during a month divided by the number active at the start of it. There is no single correct churn rate: customer churn and revenue churn, gross and net, and start-of-period and average denominators all produce different figures from identical data, so a churn rate is only interpretable alongside the definition that produced it.
Learn moreGross Revenue Retention (GRR)
Gross revenue retention (GRR, also called gross dollar retention) is the share of a cohort's starting recurring revenue still present at the end of a period, counting cancellations and downgrades but excluding all expansion. Because expansion is excluded, GRR can never exceed 100%, which makes it the only retention figure a strong upsell quarter cannot flatter.
Learn moreNet Revenue Retention (NRR)
Net revenue retention (NRR, also called net dollar retention) is the recurring revenue a fixed group of existing customers generates at the end of a period, expressed as a percentage of what the same group generated at the start, including expansion and after churn and contraction. New customers are excluded entirely. Above 100% means the existing base grew on its own; it does not mean customers are staying, because heavy expansion from a few accounts can cover substantial churn among the rest.
Learn moreLogo Churn
Logo churn is the share of customer accounts lost over a period, counting each account once regardless of what it paid. It is the customer-count view of churn, and comparing it to revenue churn reveals whether the accounts leaving are larger or smaller than average — the two rates diverging is usually more informative than either level on its own.
Learn moreContraction MRR
Contraction MRR is recurring revenue lost from customers who stayed but now pay less — downgrades to a cheaper plan, removed seats, dropped add-ons and newly applied discounts. It is distinct from churned MRR, which comes from customers who left entirely, and keeping the two separate matters because a shrinking account is a retained relationship with a product or pricing problem, while a churned one is gone.
Learn moreExpansion MRR
Expansion MRR is the additional monthly recurring revenue generated by existing customers in a period through upgrades, seat additions, add-on purchases and price increases — revenue growth from accounts already on the books rather than from new ones. It is measured as a positive movement against the prior period's MRR, excludes anything from customers acquired in the period, and is the component that allows net revenue retention to exceed 100%.
Learn moreSaaS Quick Ratio
The SaaS quick ratio divides new plus expansion MRR by churned plus contraction MRR, showing how much recurring revenue a company adds for every unit it loses; above 1 the business is growing net of losses. It shares a name with the accounting quick ratio — a balance-sheet liquidity measure of current assets to current liabilities — but the two are unrelated, use different inputs and answer different questions.
Learn moreRevenue Churn: frequently asked questions
What is the difference between gross and net revenue churn?
Can revenue churn be negative?
Should new customers count in revenue churn?
Is revenue churn better than customer churn?
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