How to calculate subscriber churn:
Churn rate = [# of Beginning Month Subscribers] / [# of Churned Subscribers] x 100
How to calculate MRR churn:
[MRR Churn rate] = [Beg. Mo. MRR] / [Churned MRR] x 100
NB: To get the right MRR Churn you will need to “normalise” the annual, semi-annual subscriptions (spread them across the months of the subscription period), as described in the MRR chapter above.
If churn is higher than 4%, then stope everything else until its down to 2-3%, and here is why.
Example: Company A currently have $100.000 MRR and monthly growth of 6% (10% revenue growth minus 4% monthly churn).
At this rate, revenue will have doubled in 12 months to $201.000 MRR (100.000 x 1,06ˆ12).
Now lets assume we managed to reduce monthly churn from 4% to 2% instead, which would mean a growth rate of 8% instead of 6%. Doesn’t sound like much, but it’s half the amount of lost subscribers. and would result in $251.000 MRR ($100.000 x 1,08ˆ12) over 12 months, instead of $201.000.