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Churn and net revenue retention
User churn, revenue churn and why NRR above 100% lets a business grow with no new customers.
why this matters
Subscription and B2B companies ask about churn and NRR in nearly every analytics loop.
Churn is the share of customers who leave in a period. Logo (customer) churn counts customers; revenue churn counts the money they took with them. They can differ a lot: losing ten tiny customers barely matters if one big customer upgraded.
Net revenue retention (NRR) asks: of the revenue we had from last year's customers, how much do we have now — including upgrades, minus downgrades and cancellations? Above 100% means existing customers are growing faster than others leave.
NRR = (starting revenue + expansion − contraction − churned revenue) / starting revenue Example: (100k + 25k − 5k − 10k) / 100k = 110%
Churn lenses
logo churn → are customers leaving? revenue churn → is money leaving? NRR > 100% → base grows on its own voluntary vs involuntary (failed cards) → different fixes
Interview trap
Monthly and annual churn don't convert by multiplying by 12. 5% monthly churn means 1 − 0.95¹² ≈ 46% lost over a year, not 60%.
Pro tip
Split churn into voluntary (chose to cancel) and involuntary (payment failed). Involuntary churn is often 20–40% of the total and is fixed with card retries, not product changes.
key takeaways
- Logo churn ≠ revenue churn.
- NRR > 100% means the base grows itself.
- Split voluntary vs involuntary churn.
check your understanding
Starting revenue $200k, expansion $30k, contraction $10k, churned $20k. What is NRR?