How to Calculate SaaS Net MRR Churn

To accurately determine your SaaS Net Monthly Recurring Revenue (MRR) Churn Rate, follow these steps:

Identify the Churned MRR. This is the total MRR lost due to cancellations or downgrades during the month. For example, if you had $5,000 in MRR lost due to cancellations, your Churned MRR is $5,000. (Protip: Check your monthly sales reports or billing system for these figures.)
Determine the MRR de expansión. This is the additional MRR gained from selling more to existing customers in the same month. For instance, if upgrades added $2,000 in MRR, your Expansion MRR is $2,000. (Protip: Review upgrade and cross-sale reports for this data.)
Subtract the Expansion MRR from the Churned MRR to find the Net Churned MRR. Using the figures above, $5,000 – $2,000 = $3,000 in Net Churned MRR.
Identify the Beginning MRR. This is the total MRR at the start of the month. Example: If your Beginning MRR was $100,000, then it remains $100,000. (Protip: This is usually the final MRR from the previous month.)
Calculate the Net MRR Churn Rate. From the example: $3,000 / $100,000 x 100 = 3.0%. Hence, the Net MRR Churn Rate is 3.0%. This metric is crucial to monitor for the health of your recurring revenue.

SaaS Net MRR Churn = [(Churned MRR – Expansion MRR) / Beginning MRR] * 100

¿Qué es la pérdida neta de MRR?

In the SaaS industry, revenue is gained when new customers sign up o existing customers upgrade. At the same time, when clients decide to cancel or downgrade a subscription, revenue is lost. This balance between losing and gaining revenue is what we call Net MRR Churn.

The Net Monthly Recurring Revenue Churn Rate measures whether the company’s MRR is growing or decreasing.

Assess overall business health by revealing if revenue is growing or shrinking, despite new customer acquisition.
Direct strategic decisions by highlighting the need to improve retention or pricing.
Measure customer success effectiveness by tracking and improving retention.

Practical Examples of SaaS Net MRR Churn

Positive Net MRR Churn: A SaaS company began with an MRR of $50,000, faced $5,000 in cancellations, but gained $8,000 from upgrades. This resulted in a net MRR churn calculation of (-$5,000 + $8,000) / $50,000 = -6%, indicating a positive growth in net MRR.
Negative Net MRR Churn: Starting with an MRR of $100,000, another SaaS company experienced a $10,000 churn and only $4,000 in expansion. This led to a net MRR churn of ($10,000 – $4,000) / $100,000 = 6%, showing a decrease in MRR.
Zero Net MRR Churn: A third SaaS company with an initial MRR of $75,000 lost $3,000 in MRR but simultaneously gained $3,000 from existing customers. The net MRR churn was ($3,000 – $3,000) / $75,000 = 0%, indicating that the MRR from existing customers was stable.

Net MRR Churn Calculation Example

This table illustrates how to calculate Net MRR Churn using sample data over three months. It includes new MRR, lost MRR, and expansion MRR.

Month	Starting MRR	New MRR	Lost MRR	MRR de expansión	Net MRR Churn	Net MRR Churn Rate
Month 1	$50,000	$5,000	$3,000	$2,000	-$1,000	-2.0%
Month 2	$54,000	$6,000	$4,000	$3,000	$5,000	9.3%
Month 3	$59,000	$7,000	$2,000	$4,000	$9,000	15.3%

In this example, we see a decrease in Net MRR in Month 1, indicated by a negative churn rate. In contrast, Month 2 and Month 3 show an increase in net MRR, indicating a positive trend in both Net MRR Churn and Net MRR Churn Rate. This is due to higher expansion MRR and lower lost MRR, which is ideal for SaaS businesses.

SaaS Net MRR Churn = ( $5,000 – $7,000 ) / $50,000 * 100 = -4%

Different Ways to Calculate SaaS Net MRR Churn

Basic Net MRR Churn: Calculates churn by taking the difference between expansion MRR and lost MRR in a single month. Useful for monthly tracking.
Net MRR Churn with Downgrades: Includes downgrades in the lost MRR formula, providing a detailed picture of churn. Ideal for tiered subscriptions.
Net MRR Churn with Reactivations: Accounts for reactivated MRR to assess the return of customers and the success of retention strategies.
Segmented Net MRR Churn: Divides customers into groups based on characteristics such as subscription plan or membership cohort to analyze and improve ineffective business aspects and understand customer departure reasons.

How to Improve Your SaaS Net MRR Churn

Understand the Basics: Ensure you know what Net MRR Churn is—this metric measures the monthly revenue lost from existing customers. Begin by identifying the reasons behind the churn.
Enhance Customer Support: Provide exceptional customer service to address issues promptly. This can reduce dissatisfaction and prevent cancellations.
Offer Customized Solutions: Tailor your services to meet the unique needs of individual customers. This can lead to higher satisfaction and lower churn rates.
Implement Feedback Loops. Regularly collect and analyze customer feedback. Use this information to adjust your product or service as needed.
Focus on Onboarding: Develop a streamlined onboarding process that helps new users quickly understand and utilize your SaaS platform effectively.
Monitor Usage Patterns: Monitor how your customers use your service. Identify inactive users and contact them to re-engage them before they decide to leave.
Offer Incentives: Give incentives for long-term commitments, such as discounts on annual payments or exclusive features for loyal customers.
Communicate Regularly: Maintain regular communication with customers through newsletters, updates, and new feature announcements to keep them engaged and informed.

SaaS Net MRR Churn Calculator

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