Calculating Churn Rate
To proactively measure and manage logo churn, businesses have each developed their own terminology, approaches, and measurements to calculating churn rate.
5 critical metrics for Calculating Churn Rate:
- Customer Success Magic Number
[ARR/MRR of customers renewed in period + ARR/MRR of up-sells in period] / [Total cost of Customer Success team + Customer Support team]
- Customer Success Batting Average
[# of customers renewed in period] / [# of customers eligible for renewal in period]
- Customer Success Headwind
[ARR/MRR* of churned customers and ARR/MRR decreases] / [Beginning of period ARR/MRR]
- Customer Success Tailwind
[ARR/MRR of up-sell and price increases] / [Beginning of period ARR/MRR]
- Net Revenue Retention Calculation
[Beginning of period ARR/MRR + ARR/MRR of up-sell and price increases – ARR/MRR of churn and price decreases] / [Beginning of period ARR/MRR]
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