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The no-BS guide to
Understanding Churn
First things first:
WHAT THE &#%! IS
CHURN?
“… measures the ultimate failure in SaaS—all of the customers
who tried out your product and decided it isn’t worth paying for”
CHURN…Steli Efti | Co-founder & CEO, Close.io
The only way to solve churn is
BRUTAL HONESTY
Instead of looking at the facts, they …
manipulate the data… and pretend the problem isn’t there
BE LIKE THEMDON’T
Most startups only measure
Customer Churn
Say you sell SaaS software to 100 restaurants and
two accounts churn this month
is a small downtown cafeONE
A 1,000-franchise chainThe other?
At 2%, your churn rate looks greatbut you just lost 25% of your revenue
It’s time for a
NEW APPROACHto churn
There are four types of churn
you need to measure
CUSTOMER#1:
Customer churn measures how many customers you lost over a
period of time.
FORMULA:TH
E
Churned customers
Total customers
EXAMPLE:FO
R
• January 1st, 2015: 1,000 customers
• January 1st, 2016: 950 customers
EXAMPLE:FO
R
50 churned customers
1,000 total customers= 5% customer churn
REVENUE#2:
Revenue churn measures how much annual recurring revenue
(ARR) you lost due to churning customers.
FORMULA:TH
E
Churned ARR
Total ARR
EXAMPLE:FO
R
• January 1st, 2015: $50,000 ARR
• January 1st, 2016: $40,000 ARR
EXAMPLE:FO
R
$10,000 ARR
$50,000 ARR= 20% revenue churn
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FREE SALES SUCCESS COURSEBecause there’s more to startup sales success than managing churn
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Monthly Sub#3:
Monthly subscription churn isolates and measures the rate at
which your monthly subscribers are churning, separate from
your annual subscribers
FORMULA:TH
E
Churned monthly subscriptions
Total monthly subscriptions
EXAMPLE:FO
R
• January 1st, 2015: 50 monthly users, 50 yearly users
• February 1st, 2015: 43 monthly users, 53 yearly users
EXAMPLE:FO
R
7 churned monthly subscribers
50 total monthly subscribers= 14% monthly sub churn
Net#4:
Net churn measures monthly churn and growth to give you a
clear look at the actual health of your startup.
FORMULA:TH
E
(Churned MRR − New MRR)
Total MRR
EXAMPLE:FO
R
• January 1st, 2015: $100,000 MRR
• January 18th, 2015: Lost $5,000 MRR
• February 1st, 2015, Gained $10,000 MRR
EXAMPLE:FO
R
($5,000 churned MRR − $10,000 new MRR)
100,000 total MRR= -5% net churn
THE WHOLEOne churn rate can’t tell
STORY
The CRM made by salespeople, for salespeople
Customer churn:
Churned customers
Total customers
Revenue churn:
Churned ARR
Total ARR
Monthly Subscription churn:
Net churn:
Churned monthly subscriptions
Total monthly subscriptions
(Churned MRR − New MRR)
Total MRR
Want more?
Check out the original
video and learn how to
improve your churn rates!
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