Description
Net MRR Churn or Net revenue churn is a SaaS metric that measures revenue lost due to cancellations and downgrades. It considers new revenue from existing customers, which may include upgrades or expansion revenue.
Example
Net MRR Churn Rate is calculated as churn MRR less expansion MRR. The result is then divided by the total MRR at the beginning of the month and multiplied by 100. Suppose Vareto's total MRR for Jan 2023 is $50,000. The churn is $2000 and the account expansion is $800. Thus, Net MRR churn will be -($2000 - $800) / $50,000 X 100 = 2.4%
Why it matters
Net MRR Churn rate is an essential metric to track for SaaS companies who want to understand their business health since it can highlight growth hurdles for the company. Since Net MRR Churn considers expansion MRR, it can give an insight into sustainability. It addresses a crucial question: can the company grow further if it continues to have this churn rate? An ideal scenario is a zero or negative churn rate to ensure the optimal impact of the new MRR.