![Page 1: The No-BS Guide to Understanding (and Calculating) Churn](https://reader033.vdocument.in/reader033/viewer/2022050613/58877f951a28ab63208b58a3/html5/thumbnails/1.jpg)
The no-BS guide to
Understanding Churn
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First things first:
WHAT THE &#%! IS
CHURN?
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“… measures the ultimate failure in SaaS—all of the customers
who tried out your product and decided it isn’t worth paying for”
CHURN…Steli Efti | Co-founder & CEO, Close.io
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The only way to solve churn is
BRUTAL HONESTY
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Instead of looking at the facts, they …
manipulate the data… and pretend the problem isn’t there
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BE LIKE THEMDON’T
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Most startups only measure
Customer Churn
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Say you sell SaaS software to 100 restaurants and
two accounts churn this month
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is a small downtown cafeONE
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A 1,000-franchise chainThe other?
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At 2%, your churn rate looks greatbut you just lost 25% of your revenue
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It’s time for a
NEW APPROACHto churn
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There are four types of churn
you need to measure
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CUSTOMER#1:
Customer churn measures how many customers you lost over a
period of time.
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FORMULA:TH
E
Churned customers
Total customers
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EXAMPLE:FO
R
• January 1st, 2015: 1,000 customers
• January 1st, 2016: 950 customers
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EXAMPLE:FO
R
50 churned customers
1,000 total customers= 5% customer churn
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REVENUE#2:
Revenue churn measures how much annual recurring revenue
(ARR) you lost due to churning customers.
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FORMULA:TH
E
Churned ARR
Total ARR
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EXAMPLE:FO
R
• January 1st, 2015: $50,000 ARR
• January 1st, 2016: $40,000 ARR
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EXAMPLE:FO
R
$10,000 ARR
$50,000 ARR= 20% revenue churn
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Sign up for our
FREE SALES SUCCESS COURSEBecause there’s more to startup sales success than managing churn
SIGN ME UP!
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Monthly Sub#3:
Monthly subscription churn isolates and measures the rate at
which your monthly subscribers are churning, separate from
your annual subscribers
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FORMULA:TH
E
Churned monthly subscriptions
Total monthly subscriptions
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EXAMPLE:FO
R
• January 1st, 2015: 50 monthly users, 50 yearly users
• February 1st, 2015: 43 monthly users, 53 yearly users
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EXAMPLE:FO
R
7 churned monthly subscribers
50 total monthly subscribers= 14% monthly sub churn
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Net#4:
Net churn measures monthly churn and growth to give you a
clear look at the actual health of your startup.
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FORMULA:TH
E
(Churned MRR − New MRR)
Total MRR
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EXAMPLE:FO
R
• January 1st, 2015: $100,000 MRR
• January 18th, 2015: Lost $5,000 MRR
• February 1st, 2015, Gained $10,000 MRR
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EXAMPLE:FO
R
($5,000 churned MRR − $10,000 new MRR)
100,000 total MRR= -5% net churn
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THE WHOLEOne churn rate can’t tell
STORY
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The CRM made by salespeople, for salespeople
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Customer churn:
Churned customers
Total customers
Revenue churn:
Churned ARR
Total ARR
Monthly Subscription churn:
Net churn:
Churned monthly subscriptions
Total monthly subscriptions
(Churned MRR − New MRR)
Total MRR
![Page 34: The No-BS Guide to Understanding (and Calculating) Churn](https://reader033.vdocument.in/reader033/viewer/2022050613/58877f951a28ab63208b58a3/html5/thumbnails/34.jpg)
Want more?
Check out the original
video and learn how to
improve your churn rates!
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