Software Growth

Churned MRR

Churned MRR is the monthly recurring revenue lost in a period because customers canceled their last subscription or stopped paying.

Churned MRR is the dollar side of cancellation. Churn rate tells you what share of customers left. Churned MRR tells you how much monthly revenue left with them, which is what actually pays the bills.

How to calculate churned MRR

Add the MRR each lost customer was paying at the moment they left.

If 25 customers each paying $40 cancel, churned MRR is $1,000. Against a starting MRR of $20,000, the monthly revenue churn rate is:

That 5% is the figure to compare against revenue churn benchmarks.

Growth without signing a new customer. The same customer base • $30,000 − $900 − $300 + $1,500 = $30,300 Fictional monthly example: −1% net revenue churn = 101% net revenue retention.
Fictional monthly example: −1% net revenue churn = 101% net revenue retention. Source / framework reference.

What counts as churn

ChartMogul classifies a movement as churn when a customer cancels their last or only subscription. If they drop one of several subscriptions or move to a cheaper plan, it is contraction MRR instead. Keep the two apart, since the fixes differ.

Include both voluntary cancellations and involuntary churn, where a card fails and the subscription ends. Failed payments can be a large share of lost customers, and they are the easiest to win back with dunning.

When to record it

Decide whether churn is recorded when the customer clicks cancel or when the paid period ends. Both are defensible. ChartMogul lets you choose either. For most small SaaS products, recording it at the end of the paid period matches the money, while recording it at the cancel click gives you an earlier warning. Choose one and do not switch.

Reading it alongside other movements

Churned MRR is one piece of net new MRR. A month with $2,400 of new MRR and $1,000 of churn is not the same as one with $1,400 of new MRR and no churn, even if the net is equal. The first treats a leaking bucket by filling it faster.

Rob Walling calls churn a metric to keep low and treats it as one of the biggest threats to a SaaS business. In episode 620 he describes about 2% monthly churn as excellent, 3% as good and 5% or more as a problem, which is his rule of thumb rather than a universal benchmark.

Small SaaS angle

One large customer leaving can distort the month. Track churned MRR by plan and by customer size, and write a one-line reason for every cancellation above a threshold you set, say $100 a month. After a quarter the reasons usually cluster into two or three fixes.

Sources

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