Gross churn is the total percentage of revenue lost in a given time period. It includes revenue lost from cancellations & downgrades.
Gross churn shows you the total percentage of revenue lost, period. In comparison:
Gross churn is the clearest way to measure whether or not a company is a) attracting the right customers, and b) delivering enough value to keep them.
Net churn is the clearest way to figure out what total revenue movements you should expect from your existing customer base.
Gross & net churn can both include voluntary and involuntary churn, so it’s worth checking to find out what you’re dealing with. Involuntary churn occurs when payments fail, rather than an intentional cancellation or downgrade.
Note: when using gross churn, negative churn is impossible (the minimum is 0%).
To calculate gross churn, take the total amount of MRR churned this month, and divide by the total starting MRR for the month. Multiply by 100.
Here’s the formula:
Gross Churn = (Churned MRR This Month / Starting MRR This Month) * 100
And here’s an example.
You’re a SaaS company starting the month with $100k MRR. During the month, you experience:
The total lost revenue is $10k MRR.
($10k / $100k) * 100 = 10% gross churn rate.
Gross churn is the total percentage of lost revenue. Net churn first subtracts expansion revenue to show the total revenue movement (up or down) from existing customers. With net churn, negative churn is possible (e.g. -2% churn means expansions outweighed cancellations & downgrades).
Customer churn reports on the total number of lost customers. It doesn’t consider the MRR value of those customers, while gross churn is the inverse (reflects only the value, not the number of customers).
