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← Statistics glossary

negative churn

Also called: net negative churn, negative net churn

When extra revenue from customers who stay (upgrades, more locations, add-ons) is larger than the revenue lost to cancellations and downgrades, so MRR grows even without new customers.

Negative churn (net negative revenue churn) happens when the extra revenue from existing customers is larger than the revenue lost to cancellations and downgrades. Even with zero new customers, MRR would grow.

The formula is net revenue churn = (churned MRR + contraction MRR − expansion MRR) ÷ starting MRR. When the result is below zero, churn is negative. Expansion can come from customers moving to a bigger plan, adding locations or seats, buying add-ons, or paying a higher price after an announced increase.

Negative churn is the strongest sign that a subscription product grows with its customers, and buyers pay more for it. It is easiest when price is tied to a value metric that grows with the customer (locations, bookings, users). A product with one flat price per customer has few ways to expand, so it has to win on low churn instead. Don't chase negative churn by pushing upgrades nobody needs: that tends to come back as cancellations a few months later.

Example

In January of year 3 about 60 shops that still pay the old 600 UAH move to 750 UAH, as announced a year earlier: expansion MRR = 60 × 150 = 9,000 UAH, taking MRR from 165,000 to 174,000 UAH without a single new shop.

Suppose that month cancellations and failed payments take about 4% of the starting MRR, 0.04 × 165,000 = 6,600 UAH. Net revenue churn = (6,600 − 9,000) / 165,000 = −2,400 / 165,000 ≈ −1.5%. Churn is negative: the existing customers alone grew MRR by 2,400 UAH.

Common mistakes

  • Celebrating a net number alone. Show gross churn next to it; a few big expansions can hide a growing leak.
  • Counting new customers as expansion. Only revenue from customers who were already paying at the start of the month counts.
  • Forcing upgrades. Expansion that customers don't feel as value turns into cancellations later.
  • Expecting it with one flat price. Without a way to pay more as they get more value, customers can't expand.