Revenue Churn

When churn — customers leaving — was counted only in accounts, a big customer and a small one both showed up as a 1. Two departures out of ten produce a single figure of 20 percent, and nothing in that figure says whether the two were small teams paying $40 a month or whether one of them was an enterprise account paying $23,000 every month on its own.

The gap showed up at Pagedeck inside a single month. Sofia reported that only two accounts had left, and when Grace opened the books, 8 percent of recurring revenue had disappeared. One of the two was the largest contract on the list. Looking at the same month, one of them called it fine and the other called it serious.

Revenue churn switches the unit from people to money so that the weight lands in the number itself. If a single account pays a quarter of all recurring revenue, the month it leaves registers as 25 percent rather than as one departure among ten.

Divide the recurring revenue lost during a period by the recurring revenue the period started with. Three steps get you there.

1. Set the denominator: monthly recurring revenue (MRR), the amount that arrives on repeat every month, as of the first day. Say the month opened at $150,000.
2. Add up everything lost during the period. That's $9,000 in cancellations plus $3,000 from a downgrade to a cheaper plan, so $12,000 in total.
3. Divide. $12,000 against $150,000 is 8 percent.

Step 2 is where teams slip by counting cancellations and forgetting reductions. A customer who kept the contract but cut its seats in half has already taken half of that money out of the month, even though nothing was cancelled.

Revenue gained isn't netted off here. Fold in the expansion revenue that existing customers add by using more and the result stops being revenue churn and becomes net revenue retention (NRR). The two numbers get reported side by side, because spotting the churn that expansion is hiding requires counting the losing side on its own.

"Logo churn is 2 percent but revenue churn is 8. We lost one large account."

By headcount the month looks fine; by money it was expensive.

"Please rerun it with downgrades included. Cancellations alone miss what we actually lost."

Pointing out that reductions are missing from the numerator.

"Six percent revenue churn two months running is faster than new business can refill."

Money leaving has outpaced money arriving.

In Pagedeck's monthly metrics review, Sofia reads out the accounts that left and Grace re-sorts the same list by amount. The months where that order flips are the months where what gets fixed first flips with it.