Net MRR Churn as a SaaS KPI

The Net Monthly Recurring Revenue (MRR) Churn Rate is a significant Key Performance Indicator (KPI) for businesses within the Software as a Service (SaaS) sector. This specific metric gauges the change in MRR, considering both the losses from churned customers and the gains from existing customers over a given period.

In SaaS businesses, where subscription models prevail, ensuring steady and growing recurrent revenue is crucial. The Net MRR Churn Rate provides insights into revenue trends that allow companies to assess the effectiveness of their customer retention efforts and measure their growth beyond customer acquisition.

Calculating Net MRR Churn Rate

The Net MRR Churn Rate is calculated by subtracting MRR expansion from MRR churn and dividing the result by the total MRR at the beginning of the period under consideration. It's typically expressed as a percentage. Here is the mathematical formula:

Net MRR Churn Rate = ((MRR Churn - MRR Expansion) / Total MRR at the beginning of the period) * 100

In this formula:

• MRR Churn refers to the monthly recurring revenue lost due to customers downgrading or cancelling their subscription within a particular period.
• MRR Expansion is the additional monthly recurring revenue generated from existing customers through upsells, cross-sells, or reduced downgrades over the same period.
• Total MRR at the beginning of the period is the sum of all the monthly recurring revenue at the start of the period.

By monitoring the Net MRR Churn Rate, SaaS companies can identify the impact of their upselling and cross-selling efforts on compensating for the revenue lost from churned customers. It is an invaluable tool for cultivating customer success and driving business growth.