Net MRR Churn Rate
Date created: Mar 22, 2018 • Last updated: Jun 10, 2021
What is Net MRR 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.Alternate names: Net $ Churn Rate, Net Revenue Retention Rate
How to calculate
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%
Net MRR Churn Rate
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What is a good Net MRR Churn Rate benchmark?
The most successful companies have a 'negative' Net Churn Rate, meaning that expansions outweigh downgrades and cancellations (Net MRR Churn of 2% per month, or Net Revenue Retention of 102% per month)
Annual Net Revenue Retention by ACVSaaS Capital, 2020
Annual Net Revenue Retention Rate by Target CustomerOpenView, Sep 2019
Annual Net Revenue Retention Rate by Target Customer TypeOpenView, 2019 (n=639)
Annual Net Retention Retention Rate by ARROpenView, Sep 2019
Annual Net Revenue Retention RatesKeyBanc, 2018 (n=200)
More about this metric
In contrast to Gross MRR Churn Rate, that looks only at downgrades and cancellations, Net MRR Churn Rate reports expansions, downgrades and cancellations.
Net MRR Churn Rate is a critical KPI for subscription-based companies because the cost of retaining a customer is always less than attaining a new one. Additionally, an existing customer is worth future revenue.
Net MRR Churn Rate is calculated by subtracting the expansions from the cancels and downgrades for the month and dividing the result by the total MRR at the start of the month.