What is Churned MRR?

Churned MRR is the monthly recurring revenue lost in a period from customers who cancel, and in some reporting also from customers who downgrade, measured against the MRR you started the period with.

At a glance

• Churned MRR usually means revenue lost to cancellations. Contraction MRR, also called downgrade MRR, is revenue lost from customers who stay but pay less.
• Billing and analytics vendors draw the line differently. ChartMogul and Recurly report churn and contraction separately; Baremetrics’ glossary describes MRR churn as cancellations or downgrades. Say which you mean.
• Gross MRR churn rate = (churned MRR + contraction MRR) ÷ MRR at the start of the period, per ChartMogul.
• Net new MRR = new MRR + expansion MRR minus churned MRR (and contraction, if you track it apart).
• It’s a lagging number. The cause is usually months earlier, in fit or onboarding.

How to calculate churned MRR

Add up the MRR of every customer who cancelled during the period. That’s churned MRR. Separately, add up the drop in MRR for every customer who downgraded, dropped seats or moved to a cheaper plan. That’s contraction or downgrade MRR. Divide either one, or both together, by the MRR you had on day one of the period to get a rate.

Example (illustrative): you start March at $100,000 of MRR. Two customers paying $1,500 and $2,000 a month cancel, so churned MRR is $3,500. Another drops from $1,200 to $700, so contraction MRR is $500. Gross MRR churn for March is $4,000 ÷ $100,000, or 4%. If existing customers also added $1,500 in upgrades, net MRR churn is $2,500, or 2.5%.

Count a cancellation in the month it takes effect, not the month the notice arrives, and keep that rule the same every month. Notices belong in a forward view like contracted ARR.

Common churned MRR mistakes

• Mixing churn and contraction without saying so. Two companies can report very different “churn” for the same customers.
• Using customer count instead of revenue. Losing ten small accounts and losing one large one are different problems. Track logo churn and revenue churn side by side.
• Hiding churn inside net numbers. Strong expansion can make net churn look fine while cancellations rise.
• Counting failed payments as churn too early. Many of them recover with a retry or a card update.
• Not tagging a reason. Without a churn reason on each record, there’s nothing to fix.

How churned MRR shows up in a revenue system

Churned MRR is where problems with fit, onboarding and support show up in the revenue line, so it belongs to the post-sale team as much as to finance. At Datatruck, our work started with one embedded AE and grew into a pod, a self-serve signup channel and then a post-sale team. Read how the Datatruck customer team runs.

Terms that sit next to churned MRR

Churned MRR is one movement inside MRR, and the revenue version of churn rate. Together with contraction it decides gross revenue retention, and with expansion added back, net revenue retention.