Net vs Gross Churn Explained
Understand the difference between net and gross churn and which to track.
Gross Churn
Gross churn (or gross revenue churn) is the MRR you lose in a period from cancellations and downgrades, with no offset for expansion. Formula: (Churned MRR + Contraction MRR) ÷ Starting MRR. It answers: “How much revenue are we losing from existing customers?”
Net Churn
Net churn subtracts expansion from the same cohort. Formula: (Churned MRR + Contraction MRR − Expansion MRR) ÷ Starting MRR. If expansion exceeds churn+contraction, net churn is negative—revenue from that cohort grew even without new customers.
Which to Use
Use gross churn to focus on “how much we’re losing” and to set retention and product goals. Use net churn (or net revenue retention) for investor storytelling and to show how much existing customers contribute to growth. Many teams track both: gross for ops, net for board and growth narrative.
Negative Churn
When expansion from existing customers is greater than churn + contraction, net churn is negative. That’s a strong signal of product-market fit and expansion motion; investors often look for net revenue retention well above 100%.