The Standard (B2B) formula compares the amount at the start of a period and then takes account of how much that has decreased by the end of that period.

For B2C subscription businesses, where there are thousands of new customers being added each month with little expansion/contraction and mostly monthly subscriptions where customers can cancel at any time, then the standard churn method isn’t necessarily the best approach. For these businesses, the Shopify (B2C) formula is more current and timely.

The selected setting will affect the different formulas in different ways, and the breakdowns can be seen below.

 

Customer churn rate

The rate at which your customers are cancelling all of their subscriptions.

The Standard (B2B) setting

Formula:

The number of customers who churned in the period (excluding any customers who both joined & churned in the period or churned & reactivated in a period) / Total number of customers at the start of the period.

Example:

If you had 100 customers at the beginning of the month, and during the month 12 customers churned, one of whom reactivated, and one of whom joined during the period, your customer churn rate would be 10%: (12 - 2) / 100.

The Shopify (B2C) setting

Formula:

SUM((Number of active customers at the start of the day) - (Number of active customers at the end of the day) / (Number of active customers at the start of the day))

Note that new customers gained that day are excluded from the calculation, as well as customers who churn and then reactivate on the same day.

Example:

Let's imagine that:
- At the beginning of the day on Monday, we had 100 active customers.
- We lost 5 customers on Monday.
- Gained 10 and lost 5 customers on Tuesday.
This leaves us with 100 customers at the end of Tuesday. As the new customers gained on Tuesday are excluded from the calculation, the customers at the end of day are counted to be 90.

If we wanted to see the churn rate for the period of Monday - Tuesday, we would do this calculation:

Monday: (100-95) /100 x 100 = 5%

Tuesday: (95-90) /95 x 100 = 5.26% 

SUM(Monday churn rate + Tuesday churn rate) = 10.26% customer churn rate

 

Gross MRR churn rate

Gross MRR Churn rate shows the revenue churn rate without being offset by the impact of upgrades.

The Standard (B2B) setting 

Formula:

(SUM of Churn & Contraction MRR) / MRR at the start of the period

Example: 

If you had $100 MRR at the beginning of the month, and during the month you lost $10 to churn MRR, and $10 to contraction MRR, while one customer increased their MRR by $10, your Gross MRR churn rate would be 20%: ($10 + $10) / $100.

The Shopify (B2C) setting

Formula:

SUM (1 - ((MRR at the start of day + MRR due to churn and contraction for the day) / MRR at the start of the day)

Example:

If we had $100 MRR at the start of the day, and at the end of the day we had $95 MRR, our Gross MRR Churn rate would be 5%:  1 - ((100 - 5)/100)

 

Net MRR churn rate

Net MRR churn rate reports the net of upgrades and paints a more positive picture than the Gross MRR churn rate.

The Standard (B2B) setting

Formula:

(SUM of Churn & Contraction MRR - SUM of Expansion & Reactivation MRR) / MRR at the start of period.

Example:

If you had $100 MRR at the beginning of the month, and during the month you lost $10 to churn MRR, and $10 to contraction MRR, while one customer increased their MRR by $10, your Net MRR churn rate would be 10%: ( ($10 + $10) - ($10 + $0) ) / $100.

The Shopify (B2C) setting

Formula:

SUM (1 - ((MRR at the end of day - New biz MRR for the day) / MRR at the start of the day))

Example:

If we had $100  at the start of the day, $120 MRR at the end of day, and $10 of the growth came from new business, our Net MRR Churn rate would be - 10%: 1- ((120-10)/100)) 

Quantity churn rate

The rate at which your customers are cancelling their subscriptions or reducing the number of licenses/seats (their subscription-quantity value).

For many types of subscription, the quantity value will just be one. But if like Salesforce.com you sell subscriptions with multiple seats then this measures the rate at which this subscription-quantity value is falling. If a subscription just has a quantity value of one, then this will count as a loss of one subscription-quantity if cancelled.

The Standard (B2B) setting

Formula:

The volume of lost subscription-quantity in the period (excluding any customers who both joined & churned in the period) / Total subscription-quantity at the start of the period

Example:

If your customers had 10 active subscription seats at the beginning of the month, and during the month 2 subscription seats were cancelled, one of whom joined during the period, your customer churn rate would be 10%: 1 / 10.