What is Churn?

Churn is the rate at which customers or revenue are lost over a given period. There are two main types:

‍Customer Churn: The percentage of customers who cancel or fail to renew.

Revenue Churn (MRR Churn): The percentage of recurring revenue lost from cancellations, downgrades, or contractions.

In SaaS, knowing who churned matters—but knowing how much revenue churned is even more critical for financial planning and investor reporting.

‍Why Churn Matters to SaaS Finance

Forecast Accuracy: High churn makes future revenue unpredictable.

Valuation Impact: Investors closely watch net revenue retention (NRR) as a sign of product-market fit.

Growth Efficiency: If you’re losing as many customers as you’re acquiring, you’re standing still.

Put simply: you can’t grow efficiently without controlling churn.

‍How to Calculate Churn

To calculate Revenue Churn Rate for a given month:

Revenue Churn Rate = Churned MRR ÷ Starting MRR

Let’s say you started the month with $100,000 in MRR and lost $5,000 to cancellations and downgrades:

$5,000 ÷ $100,000 = 5% churn

Some teams track gross churn (just losses) and net churn (losses offset by expansions). Both offer valuable insight—but require precise, consistent data to track accurately.

‍The Problem with Spreadsheet Churn

Tracking churn manually across multiple tools—CRM, billing, spreadsheets—leads to:

Inconsistent definitions (what counts as churn?)

Missed revenue contractions

Difficulty reconciling with GAAP revenue

Poor visibility into trends by cohort, plan, or channel

At scale, this creates major blind spots in your SaaS revenue engine.

‍