Get Clear on Gross and Net Churn with MetricHQ
An essential distinction that can trip up even seasoned leaders is the one between Gross and Net retention rate, or Gross and Net churn rate.
At SaaSCan, we survey Canadian SaaS companies on their churn and retention metrics and the factors driving them, so you won't be surprised to learn those are among our favourite metrics.
One of the best sources of metrics definitions out there, where you can get clear on the difference between gross and net churn rate among many other metrics, is Klipfolio's MetricHQ.
Imagine an upscale all-you-can-eat metrics buffet. With really good metrics. Well that's exactly what the good folks at Klipfolio did, and voilà MetricHQ. They're building it into the Wikipedia of Metrics, with a little help from their friends...metrics lovers around the world. (Details on how you can contribute at the end).
Let's look at how MetricHQ compares Gross Monthly Recurring Revenue (MRR) Churn Rate, and Net MRR Churn Rate.
In other words, Gross MRR Churn Rate looks at revenue lost from cancellations and downgrades, from the same group of customers, between the beginning and end of the month (or in the case of Gross ARR Churn Rate, the year). Many believe this is the purest measure of churn, because it compares how much "initial sale" customer revenue you can retain, with nothing else in the equation.
Net MRR Churn Rate takes expansion revenue, for example from cross-selling or up-selling, into account. That's the big difference. And for that reason, it's an excellent measure of how well you can expand revenue from a group of customers, following the initial sale.
You absolutely want to be tracking both Gross and Net MRR Churn Rate to gain both perspectives. To help you do that, MetricHQ shows you formulas for calculating the metrics, along with detailed examples to help you get crystal clear.
Gross MRR Churn Rate Formula and Example
Net MRR Churn Rate Formula and Example
Then you can compare your results to industry benchmarks in MetricHQ, and see how you stack up. You can even start a free trial to track and monitor your metrics in Klipfolio's top rated dashboard.
Bookmark MetricHQ today to get clear on all your metrics. Klipfolio.com/metrics
To contribute a metric, look for the Get involved section in the MetricHQ footer.
About the Author
Lauren Thibodeau is the Founder and Chief Research Officer of SaaSCan. She also runs consulting firm WTC Solutions, enabling B2B SaaS companies to grow recurring revenue and crush churn by maturing their customer experience, customer success, and product adoption practices. Lauren lives in Ottawa, Canada with her husband and three children.