Net Revenue Churn is a measure of the net revenue lost through cancellations and attrition, taking into account revenue from new customers, upgrades, and other forms of expansion. Simply put, it is actual lost revenue measured over a given period of time.
For some people, this metric can be confusing. When net income loss is negative, it means the company's revenue is increasing; when it is positive, then the company is having money loss problems.
SaaS companies try to keep the MRR (Monthly Recurring Revenue) churn rate as low as possible.
How to Calculate NRC
To calculate net revenue churn, we need to have MRR metrics tracking at hand. If you already track your net revenue churn on a monthly basis, then this won’t be a problem.
Customers often increase their spend, for example by switching to a more qatar whatsapp resource expensive plan; these actions result in expanded MRR. When this happens, Net Revenue Churn is offset.
If MRR revenue from expansion exceeds revenue lost from churn, the NRC will be negative, which represents a positive situation for the company: it indicates an increase in revenue even if no new customers are acquired.
Formula
Net Revenue Churn:
(MRR lost – MRR gained from expansion) / Initial MRR 30 days ago x 100
Net Revenue Churn measures actual lost revenue over a given period of time.
The importance of Net Revenue Churn
By knowing the net churn rate (MRR), you can predict the changes in revenue that may occur based on current customers. By having the number of losses at a glance, you can have a more realistic view of the business.
If we measure the raw churn rate, it doesn’t take into account the revenue numbers from expansion. Churn is inevitable in SaaS industries, so this metric can be used to evaluate strategies to retain existing users.