MRR Churn: What It Tells You About SaaS Health

If Monthly Recurring Revenue (MRR) is your growth engine, then MRR Churn is the drag pulling it back.

MRR Churn measures the monthly revenue you lose from customers who cancel or downgrade. While it doesn’t include expansion revenue from upsells or add-ons, it offers one of the clearest views into customer satisfaction, retention issues, and revenue risk.

Why MRR Churn Matters

Because churn compounds.

A 5% churn rate might not sound alarming at first glance. But over a few months, it snowballs — making it harder to achieve sustainable growth unless you’re replacing that lost revenue just as quickly.

Tracking MRR Churn helps you:

• Measure real-dollar satisfaction
• Diagnose retention issues early
• Forecast revenue more accurately
• Support investor and board conversations with confidence

How to Calculate MRR Churn

The basic formula:

MRR Churn Rate = (Churned MRR ÷ Starting MRR) × 100

Where:

• Churned MRR = revenue lost from cancellations or downgrades in the month
• Starting MRR = recurring revenue at the beginning of the month

Example:

• Starting MRR = $100,000
• Churned MRR = $4,000
• MRR Churn Rate = (4,000 ÷ 100,000) × 100 = 4%

Gross vs. Net MRR Churn

To understand revenue retention fully, track both:

• Gross MRR Churn = revenue lost from cancellations and downgrades Net MRR Churn = churned + contraction – expansion

Formula: Net MRR Churn Rate = (Churn + Contraction – Expansion) ÷ Starting MRR

Example:

• Churned = $5,000
• Downgrades = $2,000
• Upsells = $3,000 Net MRR Churn = (5,000 + 2,000 - 3,000) ÷ 100,000 = 4%

What’s a Healthy MRR Churn Rate?

Benchmarks vary by stage:

• Early-stage SaaS: 4–6% gross churn (monthly)
• Mid-market SaaS: 2–4%
• Enterprise SaaS: under 2%

💎 Bonus: If you have negative Net MRR Churn (where upsells outpace churn), you’re in elite territory.

How to Reduce MRR Churn

Here’s what works:

• Onboard with intention: Get customers to value, fast
• Proactive success outreach: Flag and help at-risk accounts before renewal
• Offer flexible plans: Downgrades are better than cancellations
• Track product engagement: Low usage is a red flag
• Collect exit feedback: Learn from every cancellation

Why Manual Churn Tracking Breaks Down

Still using spreadsheets? Then you know:

• Inconsistent churn definitions
• Misclassified upgrades/downgrades
• Wasted hours chasing billing and CRM data
• Disconnected dashboards across Finance, CS, and RevOps

How TrueRev Automates MRR Churn Tracking

TrueRev helps you:

• Automatically calculate churn across your customer base
• Segment by cohort, plan, or contract type
• Visualize trends in a CFO-ready dashboard
• Sync with QuickBooks to align bookings, billings, and revenue

No more data wrangling. No more guesswork. Just clean, actionable metrics your team can trust.

Final Takeaway

MRR Churn doesn’t just measure lost revenue — it reveals the long-term health of your business.

Track it consistently. Segment it smartly. Act on it fast.

👉 Read the full article here