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

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

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

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SaaS Capital, 2020

Annual Net Revenue Retention Rate by Target Customer

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OpenView, Sep 2019

Annual Net Revenue Retention Rate by Target Customer Type

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OpenView, 2019 (n=639)

Annual Net Retention Retention Rate by ARR

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OpenView, Sep 2019

Annual Net Revenue Retention Rates

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KeyBanc, 2018 (n=200)
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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

Line Chart

Here's an example of how to visualize your Net MRR Churn Rate data in a line chart over time.
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Net MRR Churn Rate

Chart

Measuring 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.