Keep customers 2 of 19 in this group
SOP 130
Separate revenue churn from logo churn
What this page is for. Use it when you already count how many customers leave and want to know how much money leaves with them. It gives revenue churn beside logo churn, the arithmetic for revenue churn, why the two are tracked in parallel, what net negative churn means, and the first thing to do.
SOP-130-Separate-revenue-churn-from-logo-churn.md
1. Logo churn: count who leaves
Churn is the customers who leave over a set period, as a share of the customers you had at the start of it. Only that starting pool counts. Customers you sign during the period do not change the figure: you could sign none or a thousand, and if five of the hundred you started with left, churn is still five percent. The worked example and the rest of the definition, as used for lifetime value, are in section 4 of SOP 55 — Compute lifetime gross profit and the ratio that gates spending.
Logo churn is this count taken as companies: the companies that leave (section 3).
2. Revenue churn: count what leaves
Revenue churn is how much revenue you lose to churn, leaving out any revenue from new customers.
The worked example:
| Line | Figure |
|---|---|
| Revenue at the start | $10,000 |
| Revenue lost to churn | $500 |
| Revenue churn | 500 ÷ 10,000 × 100 = 5 percent |
3. Track both in parallel
Understand both. Logo churn is the companies that are leaving. Keep revenue churn beside it as a parallel measure, and it lets expansion revenue show.
4. Net negative churn
This applies where you have different price points, different customers or different service levels, so that customers can be upsold. In a business like that you sometimes get what is called net negative churn. Even if you lost the bottom 5 percent of your customers, your top customers spend more than 5 percent more this year than they did last year.
When that happens, the business just keeps compounding and growing. That is said to be where every business wants to get to.
5. The first step
The first thing you can do is simply start tracking it, to begin with.
6. What this page does not decide for you
- Over what period to measure revenue churn. This page gives no figure for the period.
- How large the top group is in net negative churn. This page gives no figure for the size of the top group.
- How to combine the two into one number. Not established on this page.
7. The checklist
| Measure | What it counts | How |
|---|---|---|
| Logo churn | Companies that leave | Customers who left ÷ the starting pool; new customers do not count (SOP 55, section 4) |
| Revenue churn | Revenue lost to churn | Revenue lost ÷ revenue at the start × 100; new-customer revenue left out |
| Both | Side by side | Revenue churn as a parallel measure lets expansion revenue show |
| Net negative churn | Your top customers spend more than you lose | Sometimes possible where customers can be upsold |
| First step | Tracking | Start tracking it, to begin with |
8. What this page does not cover
Customer satisfaction scores and customer data are SOP 149 — Prioritize and niche down at five to nine people, section 7. Working out what a customer is worth over their lifetime is SOP 55. Keeping customers once you can see who leaves is SOP 129 — Derive the activation point and SOP 133 — Run the five retention habits and expect the first-month rise.
Terms defined on this page
- Logo churn
- Churn counted in companies: the ones that leave during a period as a share of those you had at its start. Companies signed during the period don't count.
- Net negative churn
- When top customers add more spending than you lose from those who leave, so the business keeps compounding. Sometimes possible where customers can be upsold.
- Revenue churn
- Revenue lost to churn as a share of revenue at the start of the period, leaving out revenue from new customers. Losing $500 of $10,000 is 5 percent.