Net Churn is the percentage of revenue loss from current customers in a period, offset by the 'expansion revenue' gained from upgrades or add-ons.
How to Calculate Net Churn
The formula in plain text:
Net churn rate = (churned MRR + downgrade MRR - expansion MRR) / MRR at the start of the period x 100
Define the inputs. Churned MRR is cancellations. Downgrade MRR is contractions. Expansion MRR is upgrades, cross-sells, and price increases from existing customers only. New-customer revenue is excluded on both sides, because net churn measures what happens to the base you already had.
A few rules keep it honest: count existing customers only, keep the period consistent (do not mix monthly losses with annual expansion), and remember that a negative result is net negative churn.
Illustrative calculation with round numbers, not a real company. Suppose a company starts the month with $100,000 in MRR. It loses $5,000 to cancellations and $1,000 to downgrades, and gains $4,000 in expansion from existing customers. Net churn = ($5,000 + $1,000 - $4,000) / $100,000 = 2%. With $7,000 of expansion instead, the same math gives -1%, which is net negative churn.
Net Churn vs Gross Churn
The difference is expansion revenue.
| Metric | What it counts | Can it be negative? | What it tells you |
|---|---|---|---|
| Gross churn | Losses only (cancellations, downgrades) | No, floors at 0% | How much you are losing |
| Net churn | Losses minus expansion | Yes | Whether the base is shrinking or growing |
The retention side mirrors this exactly. GRR (gross revenue retention) is 1 minus gross churn. NRR (net revenue retention) is the net-churn mirror, and NRR above 100% is the same fact as net negative churn. For a benchmark, SaaS Capital's 2025 survey of private B2B SaaS companies puts median NRR at 102% for companies with $25,000 to $50,000 ACVs, with the top quartile at 111% and the bottom at 97%.
Net Churn in Partner-Sourced Revenue
Partner-sourced customers can churn differently, so it is worth measuring them separately. In SaaS Capital's 2019 channel-sales survey, 52% of responding SaaS companies ran some form of channel program, and companies with and without one reported about the same retention: roughly 100% NRR and 90% GRR. Companies earning most of their revenue through channel partnerships ran about 3 percentage points lower than majority-direct companies. Net retention was roughly equal for VARs and software-company partners, and weaker with consultants and complementary non-software partners.
The practical move: compute net churn separately for partner-sourced and direct cohorts. Retention by partner type is a real input to your Ideal Partner Profile, and partner-sourced net churn feeds quantifying total partnership impact.
Frequently Asked Questions
What is a good NRR and GRR?
SaaS Capital's 2025 survey shows a median net revenue retention of 102% for companies with $25,000 to $50,000 ACVs, with the top quartile at 111%. Gross revenue retention medians run around 90%. As a rule, higher ACV correlates with higher NRR.
Is a 5% churn rate good?
It depends on the period and the variant. As annual gross churn, 5% means 95% gross retention, which sits well above the roughly 90% median. As a monthly rate, 5% is high for B2B SaaS. Always say whether you mean gross or net, and monthly or annual.
What does 110% NRR mean?
It means revenue from the existing customer base grew 10% over the period, even after every cancellation and downgrade. It is the same fact as net negative churn of 10%, and it would sit near the top quartile in SaaS Capital's 2025 benchmarks.