Monthly Accounting Churn Rate Formula
Learn how monthly customer churn, gross revenue churn, net revenue churn, ending MRR, and net MRR change are calculated.
Monthly churn measures losses from the customer base and recurring revenue that existed at the start of the month. Tracking both customer and revenue churn helps show whether departures, downgrades, and expansions are changing the value of the opening customer base.
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Monthly Net Revenue Churn Rate
Where:
Subtract expansion revenue from recurring revenue lost, divide the difference by starting monthly recurring revenue, then multiply by 100. A negative result means expansion exceeded lost revenue from the opening customer base.
Variables Explained
| Variable | What It Means | Unit |
|---|---|---|
| startingCustomers - Customers at Start of Month | Active paying customers on the first day of the month. | number |
| customersLost - Customers Lost During Month | Opening-base customers who cancelled or stopped using the service during the month. | number |
| startingMrr - Starting Monthly Recurring Revenue | Recurring monthly revenue from customers active at the beginning of the month. | currency |
| churnedMrr - Recurring Revenue Lost | Monthly recurring revenue lost through cancellations and downgrades. | currency |
| expansionMrr - Expansion Revenue from Existing Customers | Additional recurring revenue from customers that were active at the start of the month. | currency |
| newMrr - New Customer Recurring Revenue | Recurring revenue from customers acquired during the month. | currency |
Step-by-Step Calculation
Calculate customer churn
This shows what percentage of the opening customer count was lost during the month.
(customersLost / startingCustomers) * 100
Calculate gross revenue churn
This measures lost recurring revenue as a percentage of starting MRR before expansions are considered.
(churnedMrr / startingMrr) * 100
Calculate net revenue churn
This offsets lost or downgraded revenue with expansions from the opening customer base. New customer revenue is excluded.
((churnedMrr - expansionMrr) / startingMrr) * 100
Calculate ending MRR
This revenue bridge combines opening MRR, losses, expansions, and revenue from new customers.
startingMrr - churnedMrr + expansionMrr + newMrr
Calculate net MRR change
This is the total month-over-month change in recurring revenue.
endingMrr - startingMrr
Monthly churn calculation example
Customer churn
(4 / 100) × 100
4.00%
Gross revenue churn
(500 / 10000) × 100
5.00%
Net revenue churn
((500 - 300) / 10000) × 100
2.00%
Ending MRR
10000 - 500 + 300 + 1200
$11,000
Net MRR change
11000 - 10000
+ $1,000
Final Result
Customer churn is 4.00%, gross revenue churn is 5.00%, net revenue churn is 2.00%, and ending MRR is $11,000.
Assumptions
- ✓Customer churn is measured only against customers active at the start of the month.
- ✓All revenue figures are comparable monthly recurring revenue amounts in the same currency.
- ✓Churned MRR includes cancellations and downgrades recorded for the month.
- ✓Expansion MRR comes only from customers that were active at the beginning of the month.
- ✓New customer MRR is included in ending MRR but excluded from net revenue churn.
Limitations
- !A monthly result can vary substantially when the opening customer base is small.
- !Timing rules for cancellations, pauses, upgrades, and reactivations can change reported churn.
- !One-time fees, usage charges, taxes, and non-recurring adjustments are not represented unless converted consistently to recurring revenue.
- !The calculation is a management metric and should be reconciled with the business's accounting and reporting records.
Common Mistakes to Avoid
Using end-of-month customers instead of opening customers as the customer churn denominator.
Including new customer MRR in net revenue churn or net revenue retention.
Treating expansion from a newly acquired customer as expansion from the opening base.
Leaving downgrades out of recurring revenue lost.
Mixing annual contract values with monthly recurring revenue without converting them to a monthly basis.
Related Formulas
Frequently Asked Questions
What is the monthly customer churn rate formula?
Monthly customer churn equals customers lost during the month divided by customers at the start of the month, multiplied by 100.
How is gross revenue churn calculated?
Gross revenue churn equals recurring revenue lost divided by starting MRR, multiplied by 100. It does not offset losses with expansion revenue.
How is net revenue churn calculated?
Net revenue churn equals churned MRR minus expansion MRR, divided by starting MRR, multiplied by 100.
Can net revenue churn be negative?
Yes. A negative result means expansion revenue from the opening customer base was greater than revenue lost from that base.
Why is new MRR excluded from net revenue churn?
Net revenue churn is intended to measure retention of the starting customer base. New MRR affects ending MRR and total growth instead.
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