Net negative churn in SaaS
Definition
Net Negative churn, also referred to as net negative revenue churn or negative revenue churn, is when expansion revenue from existing customers surpasses churned revenue. To put it simply, the revenue increase from current customers is greater than the revenue loss from customers who churn (cancel) with your subscription business. It is seen in SaaS industries as a great position to strive towards and is shown as a percentage.
One important key factor is that the negative churn metric does not include net new customers. It is based on the current customer base.
How is Net negative churn in SaaS calculated?
The formula for calculating Net negative churn in SaaS is:Net negative churn rate = Upgrade MRR / MRR Churn
Example:
Expansion Revenue = $5,000
Lost Monthly Revenue = $4,500
$5,000/$4,500= 111% Net Negative Churn Rate
Question
To increase your negative churn there are two aspects which can be improved.
Firstly you can focus on the expansion of revenue from your current customers. This can be done through a few different ways.
Cross selling
Upgrading customers to different pricing plans
Selling of additional licences to the service (Common in SaaS)
The second element is to decrease your churn rate from your customers. This can be done through pricing, better customer support or using Upzelo to understand why customers want to churn and then work to retain them.
What is the benefit of net negative churn?
The benefit of net negative churn is that it means that your business is gaining additional revenue from your current customer base that is outweighing the loss in revenue that you are seeing from your customer churn. This will help to improve your recurring revenue and allow you to grow your business.
