How to calculate revenue churn rate
Revenue churn measures the dollars leaving, not the logos. Because it weights each customer by value, it is usually the more important churn metric for the P and L.
It comes in gross and net forms. Gross revenue churn counts only losses; net revenue churn subtracts expansion and can go negative when your base grows on its own.
- Revenue lost / starting MRR The formula
- Gross vs net Net subtracts expansion
- Weighted by value Why it matters for the P and L
Short answer
Revenue churn rate is the percentage of recurring revenue you lose in a period. Divide the recurring revenue lost to cancellations and downgrades by the recurring revenue at the start of the period, then multiply by 100. If you started with 500,000 dollars of MRR and lost 25,000, gross revenue churn is 5 percent. Net revenue churn subtracts expansion.
Step by step
Take starting recurring revenue
Use the MRR or ARR of your existing base at the start of the period as the denominator.
Sum revenue lost
Add the recurring revenue lost to cancellations (churn) and downgrades (contraction) during the period. This is gross revenue churned.
Divide and multiply
Gross revenue churn equals revenue lost divided by starting revenue, times 100.
Compute net if needed
For net revenue churn, subtract expansion revenue from the losses first. Net churn can be negative when expansion exceeds losses, meaning net revenue retention above 100 percent.
Worked example
Your base starts the month at 400,000 dollars of MRR. You lose 16,000 dollars to cancellations and 4,000 dollars to downgrades, for 20,000 dollars of gross churn.
Gross revenue churn = 20,000 / 400,000 = 5 percent. If you also gained 30,000 dollars of expansion, net revenue churn is (20,000 - 30,000) / 400,000 = negative 2.5 percent, meaning the base grew and net revenue retention was 102.5 percent.
How Ardovo handles it
Ardovo computes gross and net revenue churn from live billing, by segment and cohort. Rook flags when gross revenue churn is climbing even while net stays negative, catching a leak that expansion is temporarily masking.
Frequently asked questions
What is the revenue churn rate formula?
Recurring revenue lost to cancellations and downgrades divided by starting recurring revenue, times 100. Net revenue churn subtracts expansion from the losses and can be negative when the base grows.
What is the difference between gross and net revenue churn?
Gross revenue churn counts only revenue lost. Net revenue churn subtracts expansion, so it can be negative when expansion beats losses. Net equals the inverse of net revenue retention above or below 100 percent.
Why does revenue churn matter more than logo churn?
Because it weights customers by value, directly reflecting the P and L. Losing one large account hurts revenue far more than losing several small ones, which a logo-count churn rate would treat as worse.