What is the difference?

Gross MRR Churn Rate vs Net MRR Churn Rate

Gross MRR Churn Rate

Net MRR Churn Rate

What is it?

Gross Monthly Recurring Revenue Churn Rate (Gross MRR Churn Rate) is the percentage of recurring revenue lost due to both cancellation and downgrades. Note that it is common to express this metric as a monthly rate, though it can also be expressed as Gross ARR Churn Rate.

Net Monthly Recurring Revenue (MRR) Churn Rate is the percentage change in MRR due to expansions, cancellations and downgrades. A negative Net MRR Churn Rate occurs when expansions exceed downgrades and cancellations and is a strong positive indicator of company health. This metric is typically expressed as a monthly rate although it can also be an annual rate: Net Annual Recurring Revenue (ARR) Churn Rate.

Formula

ƒ Sum(downgraded MRR + cancelled MRR) / (total MRR at the beginning of the month)
ƒ Sum(downgraded MRR + cancelled MRR - expanded MRR) / (total MRR at the beginning of the month)

Example

For example, if the total MRR churned (downgraded and cancelled) this month was $2000 and the total MRR (measured at the start of the month) is $100,000, then the Gross MRR Churn Rate would be 2%. $2000 (churn for entire month) / $100,000 (MRR as of beginning of month) = 0.02 or 2%

Example A: A company’s MRR is $50,000 with expansions of $7,000 and downgrades and cancellations of $10,000. The Net MRR Churn Rate is ($10,000 - $7,000) / $50,000 = 6.0% Example B: A company’s MRR is $100,000 with expansions of $12,000 and downgrades and cancellations of $7,000. The Net MRR Churn Rate is ($12,000 - $7,000) / $100,000 = -5.0%

Published and updated dates

Date created: Feb 14, 2019

Latest update: Jun 10, 2021

Date created: Mar 22, 2018

Latest update: Jun 10, 2021