Study the basics of customer churn to establish customer and revenue benchmarks – MovieUpdates

What is a good monthly churn rate?

Churn gets a lot from bad press. Yes, it’s complex and confusing, but as a statistic it’s useful.

In the early stages of building a business, churn gives you quick feedback, which other metrics rarely do. By studying churn, you can run tests on your platform and get feedback in a few days or months.

In this post, we dive deep into churn. First we answer a few important questions: What is churn? What are the different types? And how can it be negative?

Next, we dive into churn benchmarks. We analyze anonymized and aggregated data to answer the question: what is a good churn rate?

So without further ado, let’s dive in.

What is churn?

Churn is an indicator of the health of your existing subscriber base. In simple terms, churn is the rate at which your SaaS business loses customers or revenue.

At a high level, you can look at churn in two ways:

  1. customer churn — measure the rate at which customers leave your SaaS business
  2. turnover churn — measure the rate at which revenue leaves your SaaS business

Negative net MRR churn is akin to SaaS nirvana, as your existing subscribers become more valuable every month.

Why look at customer and turnover trends separately?

Depending on the sales concentration, customer churn may differ from sales churn. Therefore, it is good to look at both numbers.

For example, imagine you run a SaaS business with three customers: A, B, and C. Their monthly recurring revenue (MRR) is $20, $30, and $50, respectively (for a total MRR of $100).

Now, one day, C decides to cancel their subscription and churn. So when you calculate your customer churn rate for the month, it will be 33% (as one of the three customers being churn). But if you calculate your turnover trend, this is 50%. This is because C made up 50% of your MRR.

Types of turnover development

Let’s take a closer look at the turnover trend. You can calculate the turnover trend in two different ways:

  1. Gross base — This is called gross MRR churn because it only takes into account the lost MRR (and not the MRR gained) of your existing customers. As a reminder, you will lose MRR from your existing customers through both churn and downgrades.
  2. net basis — This is called net MRR churn because you offset the lost and gained MRR of your existing subscriber base. So you lose MRR through churn and downgrades, but you also gain MRR through expansion and reactivation. Net MRR churn gives you a more holistic view of the state of your subscriber base.

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