Churn rate formulas

Note: You must have an Admin or Owner ChartMogul account to access and modify your Churn rate formula. Read more about User Permissions.

This article details the churn rate formulas available in ChartMogul and their effects on your different churn rate metrics.

Admin users can change their churn rate formula by navigating to the Data Settings page in ChartMogul at https://app.chartmogul.com/#admin/data_settings and then clicking "Show advanced settings...".

Remember to click "Save changes" once you have made any changes to your data settings.

Contents

  1. Choosing a Churn Rate Formula
  2. Standard (B2B) Formula
  3. Shopify (B2C) Formula
  4. How churn rate formulas affect graphs

 

 

Choosing a Churn Rate Formula

There are two different Churn Rate formulas to choose from:

  • Standard formula (recommended for B2B)
  • Shopify formula (recommended for B2C)

 

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.

 

Standard (B2B) Formula:

 

Shopify (B2C) Formula:

For each day in a month ChartMogul performs this cumulative calculation:

For each day we calculate the total MRR at the start of the day. We then see how much of that MRR is still present at the end of the day, ignoring any expansions, contractions and new customers. Iterating through each day in the selected period (e.g. month/quarter) gives us our MRR churn rate for the given period and provides a much more realtime churn rate.

 

How churn rate formulas affect graphs

Customer churn rate

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

The Standard (B2B) setting

Formula:

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

Example:

Lets 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.

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: (95-100) /95 x 100 = -5.26% customer churn rate

SUM(Monday churn rate + Tuesday churn rate) = -0.26% Customer Churn Rate.

This left us with a negative customer churn rate, meaning we gain new customers at a rate faster than we lose them.

 

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 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 Gross MRR churn rate would be 20%: ($10 + $10) / $100.

The Shopify (B2C) setting

Formula:

SUM((MRR at the start of the day) - (MRR at the end of 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%: (100 - 95) / 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 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((MRR at the start of the day) - (MRR at the end of 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%: (100 - 95) / 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:

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

The Shopify (B2C) setting

Formula:

SUM((Volume of subscription quantity at the start of the day) - (Volume of subscription quantity at the end of the day) / (Volume of subscription quantity at the start of the day))

Example:

Lets imagine that:
- At the beginning of the day on Monday we had 100 active subscriptions.
- We lost 5 subscriptions on Monday.
- Gained 10 and lost 5 subscriptions on Tuesday.
This leaves us with 100 customers at the end of Tuesday.

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

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

Tuesday: (95-100) /95 x 100 = -5.26% subscription quantity churn rate

SUM(Monday churn rate + Tuesday churn rate) = -0.26% Subscription Quantity Churn Rate.

This left us with a negative subscription quantity churn rate, meaning we gain new subscriptions at a rate faster than we lose them.