Revenue Churn Rate
Definition
Revenue churn rate measures the percentage of monthly recurring revenue lost due to cancellations and downgrades during a specific period. Unlike customer churn rate which counts logos, revenue churn weights each lost customer by their subscription value, giving a more accurate picture of financial impact.
Formula
Overview
Revenue churn rate (also called MRR churn rate) captures the financial impact of customer losses and downgrades. Two companies can have identical customer churn rates yet vastly different revenue churn rates if the departing customers are on different plan tiers.
Healthy SaaS companies target a gross revenue churn rate below 2 % per month. When expansion revenue from existing customers exceeds churned revenue, the result is negative net revenue churn, a hallmark of the best-performing SaaS businesses that signals strong product-market fit and pricing power.
Revenue churn should be analyzed separately from customer churn. If revenue churn is high but customer churn is low, your highest-paying customers are downgrading, a signal that your premium tiers may not be delivering enough incremental value.
Example
Starting MRR of $100K with $1,500 in cancellations and $500 in downgrades: revenue churn = ($1,500 + $500) ÷ $100,000 × 100 = 2 %.
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