The percentage of recurring revenue lost to cancellations and downgrades over a period.
Gross revenue churn = (churned + contraction MRR ÷ starting MRR) × 100; Net revenue churn = ((churned + contraction − expansion MRR) ÷ starting MRR) × 100
Start with £50,000 MRR. You lose £4,000 to cancellations and downgrades but gain £3,000 in upgrades.
Gross = (£4,000 ÷ £50,000) × 100 = 8%; Net = ((£4,000 − £3,000) ÷ £50,000) × 100 = 2%
Revenue churn (or MRR churn) measures lost recurring revenue rather than lost customers. It matters because not all customers are equal — losing one enterprise account can hurt more than losing fifty small ones.
There are two flavours. Gross revenue churn counts only the MRR lost to cancellations and downgrades; it can never be negative. Net revenue churn subtracts expansion revenue (upgrades and add-ons) from those losses, so a business with strong expansion can post negative net revenue churn — meaning the revenue gained from existing customers outweighs what was lost.
Gross churn tells you how much you are bleeding. Net churn tells you whether your existing base is growing on its own. The best SaaS businesses run negative net revenue churn, which is the same thing as net revenue retention above 100%.
Revenue churn is the truest measure of retention because it reflects pounds, not just logos. Negative net revenue churn is the holy grail — it means your customer base grows revenue even if you never sign another new account.
Best-in-class SaaS keep gross revenue churn under 1% monthly and aim for negative net revenue churn (net revenue retention above 100%).
Net revenue churn can be negative when expansion revenue from existing customers exceeds the revenue lost to downgrades and cancellations. Gross revenue churn can never be negative.
Gross revenue churn counts only lost revenue from cancellations and downgrades. Net revenue churn subtracts expansion revenue, so it can be negative. Net revenue churn is the inverse of net revenue retention.
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