Net MRR Churn Rate
Date created: Oct 12, 2022 • Last updated: Oct 12, 2022
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.
Net MRR Churn Rate Formula
How to calculate Net MRR Churn Rate
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%
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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)
Net MRR Churn Rate benchmarks
Net and Gross Revenue Retention by ACV.PNG
Annual Net Revenue Retention Rate by Target Customer
Annual Net Revenue Retention Rate by Target Customer Type
Annual Net Retention Retention Rate by ARR
Annual Net Revenue Retention Rates
How to visualize Net MRR Churn Rate?
A line chart can help you optimally visualize your Net MRR Churn Rate data by letting you see how this metric trends over time. You can then adjust your strategy to meet your goals.
Net MRR Churn Rate visualization example
Net MRR Churn Rate
ChartMeasuring Net MRR Churn Rate
More about Net MRR Churn Rate
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.