Table of Contents
Key takeaways:
- Customer churn helps you track the number of customers you’re losing, while revenue churn tracks the amount of revenue you’re losing in set periods of time
- Customer churn is impacted by cancellations
- Revenue churn can be impacted by cancellations, downgrades, and paused contracts
- It’s important to track both metrics to understand how factors like expansions, customer retention, downgrades, and cancellations are impacting your bottom line
There are multiple different churn metrics, each of which can help you understand two different things. Today, we’re going to look specifically at customer churn and revenue churn, which can tell us the following: :
- Customer churn — the number of people you’ve lost.
- Revenue churn — the amount of revenue you’ve lost.
Customer churn = customers lost. Revenue churn = money lost.
But which of these churn metrics should you use? This article will cover everything you need to know about customer churn vs. revenue churn.
Track churn metrics with greater precision with Baremetrics, the powerful metrics dashboard for data-driven subscription and SaaS businesses everywhere. Get started for free.
Customer Churn: Track Lost Subscriptions
Customer churn measures the number of delinquent customers over a specific period. In most contexts, delinquent customers are customers who:
- Cancel a subscription/service
- Downgrade a subscription
- Leave your business for one reason or another within a given period of time, typically the last 30-days
Example: Your company has 100 customers who pay for subscriptions, but 10 customers cancel their subscriptions in the last 30 days. Your customer churn rate is 10 percent.
There are steps you can take to more effectively retain clients by re-engaging customers, improving customer success programs, and identifying users who are at-risk for churn.
You can, for example, flag users who may fail to make an upcoming payment due to a canceled or expired card, resulting in involuntary churn. Using a dunning management solution can help you identify and reach out to these users to prevent the churn before it happens.
Read more: What is Negative Churn? (And How to Achieve It)
Revenue Churn: Assess Lost Profit
Revenue churn measures the amount of lost gross revenue over a specific period. In most contexts, revenue means Monthly Recurring Revenue (MRR) — the revenue your business expects to receive over 30 days.
Example: Your company has 90 customers who pay $1 a month for a subscription and 10 customers who pay $100 a month for a subscription. (Your MRR is $1,090)
- If your company loses 10 of the existing customers who pay $1 a month, your customer churn rate is 10 percent, and your revenue churn rate is 1 percent.
- If your company loses one customer who pays $100 a month, your customer churn rate is 1 percent, and your revenue churn rate is 10 percent.
Are you concerned about accurately analyzing your churn metrics? Baremetrics is the leading metrics dashboard for data-driven SaaS businesses, offering valuable churn insights to inform your next decisions.
How to Calculate Customer Churn vs. Revenue Churn
Calculating customer churn vs. revenue churn lets subscription and SaaS companies like yours compare churn from month to month.
Monthly Customer Churn Calculation
Monthly Revenue Churn Calculation
Keep in mind you can also track both gross and net revenue churn, too.
Calculating Annual Churned Customers
You can also compare customer churn every year.
There are multiple churn metrics— these are just a few. Calculating churn is different depending on the metric, and it’s also important to know how to use different metrics like LTV to assess churn.
Read more: What is Net Revenue Churn? (And How Does It Impact Your Business?)
Which Churn Metrics Should Subscription Businesses Use?
Understanding customer and revenue churn is critical because both metrics provide value.
Simply put, using both metrics tells you how many customers have left your business and how much money these customers took with them.
How to Prevent Customer Churn and Revenue Churn
You can prevent churn by identifying key insights you need to make profitable decisions that propel the business forward. Baremetrics generates daily, weekly, or monthly email reports with the following metric benchmarks:
- MRR for the given period
- New MRR added in the last seven days
- Annual Run Rate (ARR)
- The average total revenue per user
- Lifetime value for subscribers
- New, canceled, upgraded, and downgraded accounts
Tracking subscription and SaaS metrics helps you:
- Identify new and long-standing customers at-risk of churn
- Improve retention rates and attrition
- Increase customer lifetime value
- Identify new revenue sources and pricing and upsell solutions that reduce churn
- Improve customer success
In particular, Recover by Baremetrics keeps track of when customers’ credit cards are due to expire so you can contact customers and encourage them to update their card details. This way, customers never miss a payment.
Recover from Baremetrics is a simple way to prevent customers on monthly and annual subscription plans from churning, making it an invaluable tool for your business. Try it free.
Traci Accurate Churn Metrics with Baremetrics
Tracking customer churn and revenue churn provides your business unparalleled insights into how your customer base behaves. Using both metrics tells you:
- The number of long-standing and new customers who have become delinquent
- How much money these customers took from your business.
Daily, weekly, and monthly reports and Recover from Baremetrics are two features of many that help prevent customers from churning in the first place.
Identify what’s happening today and make changes that promote growth with Baremetrics, the leading metrics dashboard for your subscription or SaaS business. Start your free trial today!
Tired of wasting time on spreadsheets? Get a free trial of Baremetrics today!
