How to calculate MRR and churn rate: a worked SaaS example

Oscar

My first two months full time! And look: in October the account got over 40,000 UAH. Two shops paid for a whole year at once.

Alex Tutor

Congratulations, but don't plan with that number. Next month nobody pays for a year and the account looks sad, even if nothing bad happened.

For planning you need MRR, monthly recurring revenue: what current subscriptions bring in a normal month. A yearly plan counts as its price divided by 12.

You

So the 40,000 wasn't real?

Alex Tutor

Very real, and good for the reserve. But eleven of the twelve months of those two yearly payments belong to future months, so in planning they count as 500 a month each.

Nina

On 1 October we had 58 shops: 50 pay 600 a month, and 8 paid 6,000 for a year.

Alex Tutor

Question 1

On 1 October GarageDesk has 50 shops on the monthly plan at 600 UAH and 8 shops on the yearly plan at 6,000 UAH a year. What is the MRR in UAH?

Your answer

Units: UAH

You

And by the end of October?

Nina

Nine new shops: seven monthly and two yearly. Three monthly shops left: two cancelled, and one card failed and was never updated.

Alex Tutor

Then don't just count shops. Split the change into new MRR from new customers and lost MRR from those who left. Later you'll add upgrades and downgrades, but GarageDesk has one plan for now.

Alex Tutor

\text{MRR}_{\text{end}} = \text{MRR}_{\text{start}} + \text{new MRR} - \text{lost MRR}

MRR at the end of the month: MRR at the start, plus MRR from new customers, minus MRR from customers who stopped paying. Yearly plans count as price / 12.

Alex Tutor

Question 2

MRR on 1 October is 34,000 UAH. In October GarageDesk gains 7 monthly shops (600 UAH) and 2 yearly shops (6,000 UAH a year) and loses 3 monthly shops. What is the MRR on 31 October, in UAH?

Your answer

Units: UAH

You

MRR grew, so is everything fine?

Alex Tutor

Growth can hide a leak. Churn is the share of customers who stopped paying this month: customers lost divided by customers at the start of the month.

Nina

Why the start? We finished with 64.

Alex Tutor

Because the nine new shops had no real chance to leave yet. The same logic for money gives revenue churn: lost MRR divided by MRR at the start.

Alex Tutor

\text{churn} = \frac{\text{customers lost}}{\text{customers at start}} \qquad \text{revenue churn} = \frac{\text{lost MRR}}{\text{MRR at start}}

Both are measured for one month and divided by the start-of-month figure. Retention for the month = 1 − churn.

Alex Tutor

Question 3

GarageDesk started October with 58 paying shops and lost 3 of them during the month. What is October's customer churn, in %? Round to one decimal.

Your answer

Units: % (e.g. 4.5)

Oscar

Five percent sounds small. Ninety-five percent stay!

Alex Tutor

Per month. Churn repeats every month on whoever is left. At 5.2%, about half of today's shops will be gone within a year, and an average shop stays roughly 1 / 0.052 ≈ 19 months.

It's a leaking bucket: 64 × 0.052 ≈ 3.3 shops a month, and that grows with the base. Oscar has to sign more than three new shops a month just to stand still.

Oscar

So cutting churn from 5% to 3% is worth as much as a new sales channel.

Alex Tutor

Question 4

Monthly churn stays at 5.2%. True or false: a year from now, 12 × 5.2% ≈ 62% of today's 64 shops will have left.

TrueFalse

You

The yearly shops can't leave in October at all, can they?

Alex Tutor

Right, they decide once a year. So also look at churn among monthly shops alone: 3 of 50 is 6%. Yearly plans make the business steadier, but they can hide a problem for months.

Nina

And next March we'll see how many of the first yearly shops renew.

Alex Tutor

Mark it now. A renewal month is a churn month for yearly customers.

So report two churn numbers: for all shops and for monthly shops. If they drift apart, look closer before the renewals arrive.

Alex Tutor

Question 5

Match each October figure of GarageDesk to its value.

Pick an answer for each row. Choosing an answer that is already used moves it to this row.

New MRR
Choose an answer
Lost MRR
Choose an answer
Net change in MRR
Choose an answer
Customer churn
Choose an answer
Churn among monthly-plan shops
Choose an answer

Alex Tutor

Make it a ritual. On the first working day of each month, one page: MRR at the start, new, lost, at the end, both churns, and the names of the shops that left.

Nina

Names? It's just three rows.

Alex Tutor

Three rows today, and the only way to learn why they left. The percentage says how fast the bucket leaks; the names say where the hole is.

Oscar

I'll call all three this week.

Alex Tutor

Question 6Short answer · AI-checked task

Oscar is happy that MRR grew by 3,400 UAH in October. In 3–4 sentences, explain to him what the October numbers really say about GarageDesk and what the founders should do next.

Write your answer and get a score with feedback from our AI reviewer.

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Alex Tutor

Next time: Oscar's three phone calls, and why shops really leave.

Alex Tutor

That’s the lesson. You answered every task — nicely done.

Next lesson: Why shops leave