- Turns out churn is actually much higher than most companies are willing to admit.
- Churn only loosely correlates with a company’s size, meaning as a company gets bigger churn tends to get smaller, but only slightly.
Deeper insights into calculating and optimizing MRR/ ARR for SaaS
What to include when calculating MRR/ARR:
- All recurring elements: This will include any elements of your subscription model that are recurring. For example, any monthly fees or other recurring charges such as per user/seat, per visit, etc.
- Account upgrades: Capture the upgrade dollars from current customers who have expanded their use of your product, especially those who have moved up to a higher level plan or who have expanded their use of your value metric.
- Account downgrades: This includes the total dollar amount of customers that have downgraded their service. This is important because downgrades represent money lost from current customers that have not churned.
- Lost MRR from churned customers: This component is tallying the MRR/ARR that you lost from customers who actually churned, not those who've cancelled.
Do you want better pricing?
MRR/ARR is the sum of all subscription revenues that came into your business within a given period. Here are the items that you should include in your MRR/ARR calculations. For a larger list of all the items companies are incorrectly excluding or including in MRR, check out this blog post:You're probably calculating MRR incorrectly. Here's Why.