The 3 Ways to Calculate Churn - InsightSquared

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The 3 Ways to Calculate Churn

All SaaS executives worth their salt know that keeping churn low is essential to the success of their

business. The problem is that there are several ways to track churn, and they all provide di?erent

insights into how cancellations are a?ecting your business. Here are the 3 main ways to track churn.

1

?// Customer Churn (Logo Churn)

Customer churn is probably the most intuitive way to

think about churn: What percentage of your

customers cancelled their subscriptions during a

given time period? This metric helps you determine at

a glance how well your company is retaining the

customers it has.

30% of customers cancelled last month

2

?// Revenue Churn (MRR Churn)

The problem with tracking customer churn is that it doesn¡¯t

actually give you much information about the one metric that

really matters: How much money you lost during the period

due to cancelled subscriptions. For that, you need to look at

revenue churn. Losing a few of your biggest customers can be

a lot more damaging than losing a swarm of small fish, which is

why tracking revenue churn is the best way to see how

cancellations are actually a?ecting your bottom line.

You lost 28% of your revenue last month from churn

3

?// Discretionary Churn

SaaS companies all o?er di?erent contract terms, which

have a big impact on how you perceive the impact of churn.

Not all of your customers have the option of cancelling their

subscription at any given time, which means that your churn

rate can look lower than it actually is if you don¡¯t take this

into account. For a more accurate understanding of how

churn is a?ecting your company, look at discretionary churn:

The cancellation rate for all customers that have the

option of churning at a given time.

60% customers up for renewal last month cancelled

4

?// The Takeaway

There is no ¡°right way¡± to track churn: Each of these methods shows a di?erent aspect of how cancellations a?ect

your business. Understand their di?erences so you can pick the one that is best for each situation.

Want to analyze how churn is a?ecting your own

business? Get in touch with one of our specialists:

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