Definition
MRR churn rate measures lost recurring revenue from cancellations (churned MRR) as a percentage of starting MRR for a period. It is a revenue churn metric (not customer churn).
Formula
MRR churn rate (period) = churned MRR / starting MRR
Monthly-equivalent churn (for non-monthly windows)
Monthly-equivalent churn = 1 - (1 - period churn)^(1/period months).
How to use it
- Track churned MRR and contraction MRR separately, then track GRR/NRR for the full picture.
- Use an MRR waterfall to explain whether growth is acquisition-driven or retention-driven.
- Segment by customer size and plan (blended churn hides weak cohorts).
MRR churn QA checklist
- Use starting MRR and exclude new MRR from the denominator.
- Separate churned MRR from contraction MRR in reporting.
- Convert non-monthly windows to monthly equivalents when comparing periods.
Benchmarks and context
- Healthy churn varies by segment; SMB churn is typically higher than enterprise.
- Look at trend direction rather than a single month.
- Compare churn alongside activation and product adoption signals.
Common mistakes
- Mixing logo churn (customers lost) with MRR churn (revenue lost).
- Using ending MRR as the denominator instead of starting MRR.
- Combining downgrades into churn without labeling (contraction vs churn).