<- Glossary
Sales

Churned MRR/ARR

Table of contents
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Final Thought
FAQs
related metrics
Net Revenue Retention (NRR)
Gross Revenue Retention (GRR)
Customer Health Score (CHS)
Contraction MRR/ARR
TL;DR
Churned MRR (or ARR) is the amount of recurring revenue lost due to customer cancellations. It’s the clearest signal that a customer no longer sees enough value to continue. For SaaS sales and success teams, churned revenue isn’t just a number — it’s a learning opportunity. Tracking it closely helps you spot patterns, improve retention, and prioritize high-risk accounts before it’s too late.

What is Churned MRR/ARR?

Churned MRR or ARR measures the recurring revenue lost when a customer fully cancels their subscription. It excludes downgrades (that’s contraction) and focuses on accounts that stop paying altogether.

Formulas:

  • Churned MRR = Total MRR lost due to full cancellations in a given month
  • Churned ARR = Total ARR lost due to full cancellations in a year or quarter
  • It’s typically used in calculating:
  1. Gross Revenue Retention (GRR)
  2. Net Revenue Retention (NRR)
  3. Churn Rate (% of revenue lost)

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Why It Matters in B2B SaaS

  • It’s the purest indicator of customer dissatisfaction. If churn is rising, something in the value chain is breaking — product, pricing, onboarding, or customer fit.
  • It damages revenue momentum. Every dollar of churned revenue offsets your new sales and expansions.
  • It gives insight into ICP quality. High churn may signal that the wrong types of customers are being sold in.
  • It affects rep compensation and forecasts. In many models, reps or AMs carry churn risk — especially in account-based or multi-year sales cycles.
  • It drives post-sale accountability. A strong sales team doesn’t just land logos — it helps build customers who stay.

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How to Measure Churned MRR/ARR

  1. Identify all customers who fully canceled their subscription in the given period
  2. Pull their previous recurring revenue (monthly or annual)
  3. Sum the total lost revenue
  4. Exclude:
  • Partial downgrades (track as contraction)
  • Pause/reactivation events (unless permanent loss)

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Best Practices

  • Track churn by customer segment and cohort to identify retention challenges
  • Log churn reasons in your CRM or CS platform — qualitative insights matter
  • Map churn to product usage trends to see if disengagement started earlier
  • Use churn analysis in win-loss reviews — not just for closed-lost, but for closed-won that didn’t stick
  • Involve Sales in churn reviews, especially if the original deal may have misaligned customer expectations
Final Thought
Quotes

Churned MRR/ARR is painful — but also incredibly useful. It tells you not just what you lost, but where your sales process, onboarding, or product fit may need tuning. Whether you’re an AE trying to land better-fit customers or a CS rep looking to preempt renewal risks, churn gives you a roadmap for improvement. The goal isn’t zero churn — it’s smart churn management that protects the right revenue.

FAQs
What’s the difference between churn and contraction?
Churn is when a customer fully cancels. Contraction is a downgrade — the customer stays, but pays less.
Should churn include failed payments or involuntary cancellations?
Generally yes — unless the account is reactivated within a short grace period. Define this clearly in RevOps policies.
Can churn be a good thing?
Sometimes. Losing poor-fit or unprofitable customers may help refocus GTM efforts and improve long-term growth quality.
Should AEs be responsible for churned revenue?
Depends on your GTM model. In full-cycle or account-based sales, many teams do hold AEs partially accountable.
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