Archive - November 21, 2013

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How Mountain Climbing and Negative Churn Are Related

How Mountain Climbing and Negative Churn Are Related

I am a huge fan of For Entrepreneurs’ seminal work on SaaS metrics. I’ve read it several times over the years, I require our interns to read it and it’s a suggested resource in my class. If you are an entrepreneur running a SaaS business or even considering it, do yourself a favor and stop reading this post and read that post immediately.
One “state” that is mentioned in the post is “negative net churn”, which is when additional monthly recurring revenue (MRR) from existing customers (“expansion MRR”) exceeds MRR that is canceled from customers that are leaving (“churned MRR”) and customers that are downgrading (“downgrade MRR”). There is no doubt that negative net churn is a good thing, after all, the name connotes a negative bad thing (churn) so it must be good, right?  But I’ve heard several entrepreneurs mention negative net churn as the nirvana. That if the company achieves this milestone it will be in great shape and churn will be in check.

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