Study Up On Churn Rate Basics to Set Customer and Revenue Benchmarks

Study Up On Churn Rate Basics to Set Customer and Revenue Benchmarks

Hurn receives a lot of negative publicity. Yes, it’s complicated and perplexing, but it’s a useful statistic. Churn provides immediate feedback in the early phases of a company’s development, whereas other indicators seldom offer. Churn research allows you to perform experiments on your platform and receive data in a matter of days or months. We’ll take a deep dive into churn in this piece. 

First, we’ll address a couple of significant concerns: What exactly is churn? What are the many sorts of it? And how can it be anything but positive? Then we’ll look at churn benchmarks. To address the question, “What is a good turnover rate?” we analyzed anonymised and aggregated data. So, without further ado, let’s get started.

What exactly is churn? Churn is a metric that shows how healthy your current subscriber base is. Churn is the rate at which your SaaS business loses customers or income in plain words. Churn may be viewed in two ways from a high level: Customer churn is a metric that monitors how quickly customers abandon your SaaS business.

The pace at which revenue leaves your SaaS firm is measured by revenue churn. Net negative MRR churn is equivalent to SaaS nirvana, because your current subscribers become more valuable with each passing month. Why should customer and revenue churn be looked at separately? Customer churn might differ from revenue churn depending on revenue concentration. As a result, it’s beneficial to consider both figures.

Consider the following scenario: you manage a SaaS firm with three customers: A, B, and C. Their respective monthly recurring revenue (MRR) is $20, $30, and $50 (for a total MRR of $100). C has now decided to churn and discontinue their membership. So, when you compute your month’s customer turnover rate, it will be 33%. (One of three customers churned). However, if you calculate your revenue churn rate, you’ll find that it’s 50%. This is due to the fact that C accounted for half of your MRR.

Different types of income churn, Let’s take a closer look at revenue churn. There are two methods for calculating revenue churn: Gross MRR Churn — this is referred to as gross MRR churn since it only considers MRR lost (rather than MRR gained) from current customers. Remember that both attrition and downgrades cost you MRR from your existing clients. Because your net the MRR lost and gained from your current subscriber base, this is referred to as net MRR churn. As a result, you lose MRR as a result of attrition and downgrades, but you gain MRR as a result of growth and reactivation. Net MRR churn offers you a more complete view of your subscriber base’s health.