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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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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