Logo Churn

In products sold to companies, reporting churn as a single number used to derail conversations. A report of 5 percent churn for the quarter draws the question of how many accounts left, and when the answer is that 5 percent was measured in money, the discussion stops there.

The two versions point at completely different pictures. One large account paying $2,300 a month leaving and ten accounts paying $230 a month leaving come to the same amount of money. The first is a failure to hold one big contract; the second says small accounts aren't getting established.

So churn started being counted in two units. Counted by number of customer accounts, it's logo churn — the name comes from the slide where customer logos are laid out in a grid.

Divide the number of accounts that cancelled during a period by the number of accounts that existed at the start of it. Start a quarter with 120 accounts and lose 6, and logo churn is 5 percent.

Three things have to be settled before the number means anything.

1. Which moment the denominator comes from — use the account count at the start of the period. Put accounts that arrived mid-period into the denominator and the value reads low. Dividing 6 by the 150 you reached after 30 new accounts joined gives 4 percent, and the 6 that left have nothing to do with the 30 that arrived.
2. What counts as one account — contract or legal entity, decided in advance. Three departments of the same company on separate contracts can be counted as three or as one, and the value shifts a lot depending on the choice.
3. When a cancellation lands — the day notice is given and the day the contract actually ends are usually a month or two apart. Dating it by notice makes a worsening signal visible sooner; dating it by contract end lines the metric up with the revenue numbers.

Converting a monthly figure to an annual one is not multiplication. Two percent a month over twelve months is roughly 21.5 percent, not 24, because the rate only applies to the accounts still there each month.

"Logo churn is 5 percent but revenue churn is 1 percent. Everything that left was a small account."

Reading the character of the churn by putting the two units side by side.

"Six accounts in logo churn this quarter. Four of them left within three months of starting."

Splitting the number further by when each departure happened.

"We agreed to count departmental contracts as one account, so last quarter has to be pulled again."

Changing the counting unit makes past values incomparable.

At Pagedeck, Sofia brings this number to Grace each quarter. All six accounts that left last quarter were small teams on five seats or fewer, and four of them left within three months. So the next quarter's work became fixing the first three months for small teams rather than protecting large contracts.