Plain definition
Revenue churn measures recurring revenue lost from customers or subscriptions that were present at the start of a period. It differs from customer churn because losing one large account can outweigh many smaller customers, and because a retained account can contract without leaving. The definition must state whether it is gross or net of expansion.
For a gross view, use starting recurring revenue less churned and contracted recurring revenue, divided by starting recurring revenue. Do not use new-customer revenue to offset a retention problem.
Illustrative example
Monetary examples use Saudi riyals (SAR). The same principles apply in other currencies.
Suppose a company begins with of MRR, loses when customers leave, and loses when remaining customers downgrade. Gross revenue churn is 15%. New subscriptions signed that month do not change this result.
This directs management to the revenue concentration and product or pricing causes inside the installed base, rather than treating total MRR growth as proof of retention.
| Starting MRR | |
|---|---|
| Churned MRR | |
| Contracted MRR | |
| Remaining gross-retained MRR |
| Lost MRR from churn and downgrades | |
|---|---|
| Starting cohort MRR | |
| Convert to percent | |
| Gross revenue churn |
Keep MRR and ARR as run-rate measures; revenue churn is not recognised revenue or cash churn.
Why it matters
Revenue churn reveals whether the recurring base is losing its economic value even when the customer count seems stable.
Practical consequence
Use the same starting revenue cohort and movement rules across periods. Split churn, contraction, expansion, and new business; inspect lost revenue by account size, tenure, plan, and reason. Reconcile the bridge to subscription records and use gross revenue retention where expansion needs to be kept separate.