What’s the Relationship Between Revenue Churn and Logo Churn? 

Revenue Churn and Logo Churn

Revenue churn, logo churn… Even if you don’t know exactly what these are, you can probably make the safe assumption that churn isn’t a good thing for businesses. It connotes constant motion and upheaval, and that’s just what these metrics indicate for SaaS companies that would really prefer things to be consistent and calm.

But churn is also pretty much unavoidable.

Not surprisingly, SaaS companies that depend on ongoing subscriptions for success are particularly attuned to churn rates. For SaaS founders, especially, high churn is the stuff bad dreams are made of. High churn rates mean a lot of customers aren’t satisfied with what they’re getting.

But there is good news — kind of. The silver lining, as with any SaaS metric, is that you can calculate, track, and analyze churn and draw important conclusions about your business based on the numbers you see. Knowledge is power, and being able to track and analyze your churn rates allow you take control of a problematic situation to ensure your revenue stays where you need it to be… and even grows.

There’s more than one type of churn

More than one type of churn

When people talk about “churn,” they’re most often referring to logo churn. But it’s also important to look at revenue churn. Here are the definitions of those two differing metrics:

  • Logo churn: A calculation of how many customers cancel or fail to renew their subscription during a given period of time.
  • Revenue churn: A calculation of how much revenue is lost by customers not renewing or canceling during a given period of time.

Revenue churn comes in two different flavors: gross and net. Gross revenue churn indicates the entire amount of revenue resulting from customer cancelations and non-renewals, while net revenue churn is that amount minus any increase in revenue resulting from upgrades and expansions of customer engagement.

Look at logo churn + net revenue churn

Look at logo churn and net revenue churn

Net revenue churn is a more useful metric than gross revenue churn, since it takes into account all customer activity in a given time period. A finding that you’ve lost a lot of customers in a given month will feel like a terrible blow, if you’re just looking at the gross revenue churn. However, your dismay may well be attenuated if you discover that the number of customers who expanded their plans to access new features has boosted your revenue by almost the amount you’ve lost to customer attrition, making net revenue churn quite low.

You can understand what’s really happening in the above scenario by looking at logo churn and net revenue churn in concert. While, as a rule, it’s not good to have a high level of either metric, the loss of customers — logo churn — is only meaningful in a business sense if it’s tied to its effect on your business’ bottom line.

Imagine a scenario where your logo churn is very high one month, because you raised your product’s prices at the beginning of that month. You don’t want to lose customers, so that may seem bad. Yet when you calculate your net revenue churn, you realize that the revenue produced by the remaining customers paying the higher prices is close to the amount generated by the greater number of customers paying lower prices.

In that scenario, your logo churn is higher than your net revenue churn, and the two of them together give you a good understanding of what is happening with your business. Keeping an eye on both of these metrics and looking at how they interact is essential to good strategic decision-making.


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