Okay, let's recap our information.

We had ten customers that paid us a total of $34,500 MMR last month.

One is relatively huge and pays us 10,000 a month, that's customer 10.

8 are medium sized and pay us $3,000 a month each.

And 1 is relatively small, customer 1, and they pay us $500 a month.

The 4 questions we have are, 1,

what is the Gross MRR churn is we lose 2 medium sized customers?

2, what about just the Gross Churn if we lose 2 medium sized customers?

3, what is the Gross MRR churn if we lose our 1 big customer?

And finally, 4, what is gross churn, if we lose our 1 big customer?

So if we lose medium size customers that cancelled MRR as worth

6,000 to a medium size, so we'll write 6,000 here.

6,000 divided by our beginning month

MRR of 34,500 gets us a gross MRR churn of not 0.17,

it's 17.39%, that's really high.

Let's look at just our gross churn calculation.

In this case, we would lose 2 customers

divided by the 10 at the beginning of the month, and we don't have 20 cents.

Again, it should be a percentage 20%, that's also high.

Now let's walk through the big customer example.

We lose $10,000 of MRR, and we divide that 10,000

by our beginning of month balance, 34,500.

And we just gotta format this correctly, 28.99%, sound the alarm bells.

Let's look at gross churn here.

Gross churn would be 1 divided by 10, and you got 0.1 is 10%.

This example illustrates how the calculation

you use can have a large impact on your understanding of the business.

Let's introduce a few other dynamics to these calculations,

specifically contraction and expansion of our customer accounts.

Remember, we charge our customers based on activity, and

that can fluctuate month to month.

So, let's start over and pretend we still have our 10 customers, and

34,500 in previous month's revenue.

In this period,

our large customer with 10,000 in MRR is still sadly going to cancel.

So we have cancelled MRR of 10,000, and I'm gonna label it just so

it's a little bit more clear and get these formats sorted.

Okay, so the large account is still gonna churn 10,000 of cancelled MRR.

However, we also have one medium customer shrink their account from 3,000 to 2,000.

This will be known as Contraction MRR, and

would mean we have a Contraction MRR of $1,000 in this period.

So I will, do that knock one zero off,

and type in the Contraction MRR.

Finally, in addition we have three of our medium accounts increased their

activity on the software.

Translating to an increase in what we charge them for

6K each, going from 3K to 9K.

That's called Expansion MRR.

Let's write it in Extension and it's three accounts,

increasing the account size from 3 to 9k, so that would be $18,000 in Expansion MRR.

It's not a percentage, and it's not 180,

there we go, 18,000 Expansion MRR.

So to recap, you're starting with the beginning month MRR of $34,500.

We had Cancellation MRR of 10K, we had Contraction MRR of 1K,

and we had Expansion MRR of 18K.

Cancellation and contraction are bad, expansion is good.

So our calculation of Net MRR Churn would be,

Net MRR Churn = (Cancellation MRR +

Contraction MRR- Expansion MRR) / BOM MRR.

So in this situation Net MRR Churn

is going to be equal to cancellation

+ contraction- expansion

divided by beginning month.

And I missed a parent that are, a formula up here.

So I'm gonna head, and had that in.

So in this example, our Net MRR Churn is

a very superb number of -20.29%.

When you have negative MRR churn it means the amount of money you're charging your

existing customer base is growing.

I have seen people I respect, split up Net MRR Churn in two components.

A combination of Gross MRR Churn and Net Expansion MRR.

Where Net Expansion MRR is just the calculation of the Delta between your

Expansion and Contraction MRR.

Let's walk through that in this example.

So we have our Gross MRR Churn,

our Net Expansion MRR, and then our Net MRR Churn.

Our Gross MRR Cchurn in this example is 10,000 divided by

the 34,500 our Canceled MRR, so there's our Gross MRR Churn.

Then our Net Expansion MRR would be a Contraction MRR-

the Expansion MRR divided by our beginning of month MRR.

And our Net MRR would be the Gross MRR Churn + the Net Expansion MRR.

And you can see you get the same Net MRR number.

It can be helpful to split out these two churn calculations if, for

example, you have different teams working on preventing customers from canceling

versus upselling existing customers.

It just depends on the situation.