In this guide
Churn measures loss, but the word alone is incomplete. Losing five customers and losing 5% of recurring revenue are different events. A useful SaaS review shows both the customer relationship and the revenue that remains.
This guide uses an opening-customer-base method: start with customers active at the beginning of the period and follow that group to the end. New customers acquired during the period do not repair that group's churn rate. All examples are fictional and exclude tax.
How to calculate customer churn rate
Customer churn rate = customers lost from the opening base ÷ customers in the opening base × 100.
If you start with 200 paying customers and ten of those customers leave, customer churn is 10 ÷ 200 × 100 = 5.00%. Winning 30 new customers does not change that loss rate; it changes the closing total.
Define what it means to lose a customer. Cancelling one of several active subscriptions is not necessarily full customer churn. ChartMogul's customer churn documentation illustrates the distinction between a customer leaving entirely and a continuing customer reducing subscriptions.
Record whether the metric covers paying accounts, all accounts or subscriptions. A count of subscriptions is not interchangeable with a count of customers, and a trial ending is not automatically a lost paying account.
Gross revenue churn, GRR, net churn and NRR
Revenue retention asks what happened to the opening base's recurring value. In the formulas below, lost MRR and contraction are positive loss amounts. Expansion is an increase among that same opening base.
| Metric | Formula |
|---|---|
| Gross revenue churn | (Lost MRR + contraction MRR) ÷ opening MRR × 100 |
| Gross revenue retention (GRR) | (Opening MRR − lost MRR − contraction MRR) ÷ opening MRR × 100 |
| Net revenue churn | (Lost MRR + contraction MRR − expansion MRR) ÷ opening MRR × 100 |
| Net revenue retention (NRR) | (Opening MRR − lost MRR − contraction MRR + expansion MRR) ÷ opening MRR × 100 |
Gross retention excludes expansion. Net retention includes it. That is why a business can report strong NRR while still having a problem with downgrades or customer departures. ChartMogul's NRR explanation also describes how expansion and contraction affect the retained recurring base.
Reactivation policies vary between systems. In this guide, returning customers who were absent from the opening base stay outside that period's NRR numerator. A return within an established cohort can be included in a cohort snapshot. State the policy before comparing percentages from two reports.
Worked example: growth alongside customer losses
Consider the following monthly changes. Customer churn concerns the opening 200 customers. Revenue retention concerns their £20,000.00 opening MRR.
| Item | Value |
|---|---|
| Opening customers | 200 |
| Customers lost from that base | 10 |
| Opening MRR | £20,000.00 |
| MRR lost from ended customer relationships | £1,800.00 |
| Contraction among continuing customers | £700.00 |
| Expansion among continuing customers | £3,000.00 |
| New-customer MRR | £3,000.00 |
| Reactivation from outside the opening base | £500.00 |
The results are:
- Customer churn: 10 ÷ 200 = 5.00%.
- Gross revenue churn: (£1,800.00 + £700.00) ÷ £20,000.00 = 12.50%.
- GRR: £17,500.00 ÷ £20,000.00 = 87.50%.
- Net revenue churn: (£2,500.00 − £3,000.00) ÷ £20,000.00 = −2.50%.
- NRR: £20,500.00 ÷ £20,000.00 = 102.50%.
Total closing MRR is £24,000.00 after adding new business and outside-base reactivation. Overall MRR growth is 20.00%, while customer churn is still 5.00% and gross revenue churn is still 12.50%.
The management question is therefore more specific than “are we growing?” Which customers left, why did others downgrade, and is expansion concentrated in a few accounts? Negative net revenue churn does not mean nobody left.
Monthly churn is not annual churn divided by twelve
Under the simplified assumption of constant monthly churn, no reactivation and a fixed starting customer group:
Annual loss rate = 1 − (1 − monthly churn rate)^12.
A 5.00% monthly loss rate implies approximately 45.96% lost over twelve months, not 60.00%. This is an illustration of compounding, not a forecast. Actual renewal cycles, customer age and seasonality can produce very different patterns.
When reporting annual retention, calculate it from the actual opening group and its later status where history is available. Keep monthly, quarterly and annual rates clearly labelled.
Missing renewals are a data question first
An annual invoice is usually absent in eleven months of the year. Treating every month without an invoice as churn would misclassify that customer repeatedly.
Use recurring service periods or a subscription status history, and check cancellation dates, renewal dates, pauses and failed-payment handling. A product change can also move a customer out of one plan segment while they remain active in the business.
In Profitcura Revenue Intelligence, a supported recurring service period ending produces an ended-service observation. The imported evidence may establish that no further service is visible; it does not independently confirm cancellation. The current NRR calculation follows the previous month's recurring customer base and excludes new or outside-base reactivated customers. Invoice-only cohorts describe billing behaviour, not verified subscription churn.
How to make the churn review actionable
- Verify the largest losses. Check renewal completeness, duplicate customer IDs and credit treatment before contacting the commercial owner.
- Separate timing from cause. A dated cancellation or ended service is an event; it does not explain whether the reason was price, product fit or business closure.
- Compare customer age. Use cohort analysis to distinguish early onboarding losses from later renewal losses.
- Review the economics of retention. A discount may retain revenue while reducing direct margin. Compare the revised outcome with CAC payback and observed customer value.
- Assign a measured next step. Name the owner, review date and evidence that would support or reject the proposed action.
A benchmark needs a comparable business model, customer price point, period and calculation policy. Set targets in that context rather than assuming a single churn percentage is right for every SaaS company.
Common churn questions
Can NRR be above 100%?
Yes. Expansion within the measured group can exceed losses and contraction. Check GRR and customer retention alongside it so expansion does not hide departures.
What if opening MRR is zero?
The percentage has no valid denominator. Report it as unavailable, while showing new business and closing MRR separately.
Should new customers be included in retention?
Not in an opening-base retention measure. New business belongs in the MRR movement bridge, while retention follows a defined existing group.
Explore Profitcura's revenue and retention analysis or request a product walkthrough. The product is in active development, with pilot access agreed separately.