"What's your churn?" has at least four correct answers, and investors know it. Reporting the right one, defined clearly, saves a round of follow-up questions.
The variants
| Metric | Formula (for a period) |
|---|---|
| Logo churn | Customers lost ÷ customers at start |
| Gross revenue churn | (Churned ARR + contraction) ÷ starting ARR |
| Net revenue churn | (Churned ARR + contraction − expansion) ÷ starting ARR |
| Revenue retention | 1 − churn, which is GRR or NRR |
A worked example
Start of quarter: 400 customers, $4,000,000 ARR.
- 12 customers leave, representing $90,000 ARR.
- Contraction from remaining customers: $30,000.
- Expansion from remaining customers: $160,000.
| Metric | Result |
|---|---|
| Logo churn | 12 ÷ 400 = 3.0% for the quarter |
| Gross revenue churn | ($90,000 + $30,000) ÷ $4,000,000 = 3.0% |
| Net revenue churn | ($90,000 + $30,000 − $160,000) ÷ $4,000,000 = −1.0% |
Negative net revenue churn means the installed base grew on its own this quarter.
Monthly and annual rates
Convert carefully. Annual retention is monthly retention compounded: (1 − monthly churn)^12. A 1% monthly logo churn means roughly 11.4% annual churn, not 12%. For annual contracts, measure churn at renewal events, since customers can only leave at renewal.
Reasons, not just rates
Tag every churn and contraction event with a reason: product gap, price, budget, acquisition of the customer, company shutdown, poor onboarding. A quarterly view of churn by reason gives product and customer success a list to work on and gives the board an explanation instead of a number.
Where it comes from
Churn should be calculated from the billing system's subscription records and match the ARR bridge exactly. CRM churn fields are useful for workflow, but they drift from billing reality.
Reporting
Segment it
A blended churn rate hides more than it shows. Split it at least three ways:
| Cut | Why it matters |
|---|---|
| Customer size (SMB, mid-market, enterprise) | Smaller customers usually churn faster, so mix shifts move the blended rate |
| Acquisition cohort | Shows whether newer customers retain better or worse than older ones |
| Plan or product line | Points to the offer that is losing customers |
A short checklist
- Define churn once, in writing: when a customer counts as lost (cancellation date, end of term, or non-payment cut-off).
- Exclude customers who moved to another entity or account and kept paying.
- Treat downgrades as contraction, not churn.
- Recalculate prior periods if a definition changes, and say so.
For SaaS boards and investors, the standard set is gross revenue retention, net revenue retention and logo churn, trailing twelve months, with a cohort table. We calculate them monthly from the same data as the ARR bridge so every retention figure ties to every other.
Sources
Questions founders ask
Can monthly churn be multiplied by twelve to get annual churn?
Not accurately. Annual churn compounds: one minus (one minus the monthly rate) to the twelfth power. A 2% monthly rate is about 21.5% annually, not 24%.
Is negative churn real?
Net revenue churn is negative when expansion from remaining customers exceeds revenue lost from churn and contraction. It is the same condition as NRR above 100%.
