No matter how strong a subscription-based company’s MRR is, if there is a high Churn Rate % in revenue and customers, the MRR Growth Rate will not be consistent, leaving the company to rely more on new sales to keep growing.
As this metric is one of the most critical to monitor, we have redesigned the dashboard called “Churn Performance” and also re-adjusted the churn rate’s formula. We reviewed this metric with 3 different subscription-based companies in order to calculate all the possible outcomes based on daily, weekly, monthly, yearly and usage subscriptions.
Our churn rate formula is straightforward:
- Churn Rate % (Revenue) = Churned Revenue / Total Subscription Revenue
- This is the % of lost revenue in the date range selected.
- Churn Rate % (Subscriptions) = Churned Subscriptions / Total Subscriptions
- This is the % of lost subscriptions (#) in the date range selected.
In this dashboard called Subscription Revenue, there are 2 charts that track the total revenue generated by subscriptions and the total churned revenue. In this case, I have filtered this dashboard for the past 12 months. As you can see, the Total Subscriptions Revenue is USD 75,461.42, and the Churned Revenue is $19,099.34. Therefore the churn is calculated by dividing both amounts.
Churn Rate % = Churned Revenue / Total Subscriptions Revenue
Churn Rate % = 25.31%
Information to highlight:
- This churn calculation is already normalized, so if a yearly subscription of $1,200 is churned, only $100 will be counted.
- Subscription revenue only (one-time customers are excluded).
Churn Perfomance – Metrics:
- Churned Subscriptions:
- Total subscriptions churned in the selected date range.
- Churned Revenue:
- Total churned revenue in the selected date range.
- Churn Rate % (Revenue):
- Total Churned Revenue / Total Subscriptions Revenue
- Churn Rate % (Subscriptions):
- Total Churn Subscriptions / Total Subscription
- Churned Heatmap:
- Track how much revenue is lost every 30 min or every 24 hours.
- New Subscriptions vs Churned Subscriptions:
- The Subscription Performance for April is -11 subscriptions, meaning that during that month only 2 new subscriptions were acquired, but 13 were lost.
Get started for free by connecting your Stripe and PayPal accounts to track, analyze, and reduce your Churn Rate %.