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What Is Churn Really Costing Your Growth?

What is churn really costing you? Enter your MRR, the new MRR you add each month, and your churn, and see where revenue lands, how much new business just replaces what you lose, and the ceiling churn puts on growth.

From new customers only.

MRR lost each month to cancellations and downgrades, as a percent of MRR. If you track annual churn, 30% a year is about 2.9% a month.

Optional. MRR added each month from upgrades and add-ons by existing customers.

Starting values are an example, not benchmarks. Replace them with your own numbers.

MRR in 12 months

$171,437

Churn takes $48,563 along the way, 40% of all the new MRR you add.

Growth

71%

ARR $2,057,241

Lost to churn

$48,563

vs. $120,000 new MRR added

Growth ceiling

$333,333

MRR where churn cancels out new MRR

With churn 1 point lower

$186,113

$14,677 more MRR

MRR in 12 months at different churn rates

Same starting MRR, new MRR, and expansion.

Monthly churnEnding MRRLost to churnGrowth ceiling
1%$202,254$17,746$1,000,000
2%$186,113$33,887$500,000
3% (yours)$171,437$48,563$333,333
5%$145,964$74,036$200,000
7%$124,917$95,083$142,857

Why churn is a growth problem

Every dollar of churn has to be replaced before new business counts as growth. At low revenue, churn is easy to ignore because new sales outrun it. As revenue grows, the same churn rate takes a bigger bite each month, until it cancels out everything sales and marketing bring in. That point is the growth ceiling.

The formulas

  • Each month: next month's MRR = this month's MRR × (1 − churn + expansion) + new MRR.
  • Lost to churn = the sum of each month's MRR × churn.
  • Share of new MRR that replaced churn = lost to churn ÷ total new MRR added.
  • Growth ceiling = new MRR each month ÷ (churn − expansion). At that size, churn equals new MRR and growth stops. If expansion is greater than or equal to churn, there's no ceiling.

Getting the inputs right

  • Use revenue churn, not customer churn, if your customers pay different amounts. Losing one big account can matter more than losing ten small ones.
  • Monthly, not annual. If you track annual churn, convert it: 1 − (1 − annual churn)1/12. A 30% annual churn rate is about 2.9% a month.
  • Expansion is optional. Upgrades and add-ons from existing customers offset churn. If they outweigh it, you have net negative churn, and your existing customers grow revenue on their own.

How to use the result

Look at the "with churn 1 point lower" number. It's often worth more than the next marketing campaign, and it compounds. If your growth ceiling is close to where you are now, more top of funnel won't fix it. Retention will. To see what new customers cost to win, try the customer acquisition cost calculator.

Need help turning these numbers into a growth strategy?

Calculators can help you understand the numbers. Building a repeatable growth engine requires the right strategy, positioning, execution, and measurement. Robert Gilbreath works with founders and leadership teams to develop practical go-to-market and marketing growth programs.

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