Gross and Net Revenue Churn

This article is a part of my Churn Combat Kit. Read the rest of the chapters here.

Revenue churn can be measured in two ways

• Gross revenue churn

• Net revenue churn

While both track how much money you lose to churn, they are slightly different.

Gross revenue churn is more drastic, while net revenue churn isn't.

Example math

Let’s say you have 1,000 customers, each paying $100/month.

Metric	Value
Customers	1,000
Price per customer	$100/month
Starting MRR	$100,000

At the end of the first Month, 200 customers churn.

Metric	Value
Customers churned	200
Revenue lost from churn	$20,000

The remaining 800 customers upgraded to $110/month, up from $100.

So, what is your revenue churn?

To answer it correctly, you will need to segment it out and look at gross revenue churn and net revenue churn.

Metric	Value
Revenue lost from churn	$20,000
MRR at the start of the period	$100,000
Gross revenue churn	20%	Gross revenue churn does not account for expansion revenue.

But your customer success team or monetization team managed to grow existing accounts.

Metric	Value
Revenue lost from churn	$20,000	200 customers * $100
Revenue gained from upsells	$8,000	800 customers * $10
MRR at the start of the period	$100,000
Net revenue churn	12%	$12,000 / $100,000

If net revenue churn is negative, it means you're gaining more than you lose.

When to use net vs gross revenue churn?

Use Net Revenue Churn to measure how much you gain from existing customers to make up for the loss from customers who leave for good.

This metric is usually referenced in investor reports.

But tracking Gross Revenue Churn is helpful to ensure you're not over-extracting revenue from existing customers to offset losses with price increases. Especially when customers are locked in.

Go to Next Chapter