Churn can make or break your SaaS business. Understanding it is vital to thriving.

Two key metrics that often confuse SaaS leaders are gross churn and net churn. Both are essential for gauging your company’s health, but each tells a different story.

So, what’s the difference, and why does it matter?

In this article, we’ll break down gross churn vs net churn and explore how these metrics impact your business. Here's what we’ll cover:

• What is gross churn?
• What is net churn?
• The key differences between gross churn and net churn
• How to keep existing customers and reduce churn

Ready to turn churn into growth? Let’s get started!

But first, revenue churn or customer churn?

Before diving into gross churn vs net churn, it’s important to clarify what we mean by churn. Churn can refer to either customer churn (the number of customers leaving) or revenue churn (the amount of revenue lost).

In SaaS, revenue churn is often the more critical metric because it shows the true financial impact of losing customers—especially when not all customers contribute equally to monthly recurring revenue (MRR).

While tracking customer churn (also referred to as logo churn) helps identify customer retention issues, understanding revenue churn gives a clearer picture of your business's overall health and revenue growth.

In this article, we’ll focus entirely on revenue churn to give you a clearer picture of your company’s revenue dynamics.

What is gross churn?

Gross churn refers to the total percentage of lost revenue from churned customers over a specific given period. It gives a raw, unadjusted view of how much of your monthly recurring revenue (MRR) is lost when customers leave or downgrade their subscriptions.

For tech companies, understanding gross churn is important because it highlights the revenue churn without factoring in any expansion revenue from upgrades or cross-sells.

💡 This metric is particularly helpful for identifying customer attrition trends and evaluating the logo churn rate. However, it’s not the full story—gross churn doesn’t account for additional revenue earned from customers who upgrade their plans.

It’s a key metric to track if you want to know the total revenue your company is losing due to customer cancellations.

How to calculate gross revenue churn

To calculate gross revenue churn, you simply look at how much revenue your business lost from churned customers during a set period. For instance, if your SaaS company starts the month with $10,000 in MRR and you lose $1,000 from departed customers, you’ve experienced a 10% gross churn rate.

This shows how much lost revenue needs to be offset by bringing in new customers or encouraging loyal customers to upgrade.

Focusing on gross churn helps tech companies identify how well their customer retention strategy is working and whether they need to improve customer satisfaction to retain more customers.

What is net churn?

Net churn is a more comprehensive way to assess revenue churn because it factors in both revenue lost from lost customers and revenue gained from customers upgrading their subscriptions or purchasing additional services.

Unlike gross churn, net churn paints a fuller picture of your company’s financial health by including expansion revenue from subscription upgrades and cross-sells.

💡 For SaaS businesses, net churn is crucial because it shows whether you’re losing more than you’re gaining. If your net churn rate is low or even negative churn, it means that your existing customer base is contributing enough revenue growth through expansion revenue to offset any lost revenue.

This is the goal for most Tech companies—ensuring that their customer retention strategies are driving growth, not just plugging leaks.

A good lifecycle email marketing strategy can help you get there.

How to calculate net revenue churn

Calculating net churn is about balancing the revenue lost from departed customers with the revenue gained from upsells or cross-sells to existing customers.

For example, if your business loses $1,000 in revenue churn but gains $500 from customer upgrades, your net revenue churn rate is much lower than the gross churn rate.

A company with high gross churn might still see positive revenue growth if enough customers are upgrading their plans. This makes net churn a better indicator of overall revenue health for tech companies.

Want to know where your company's churn stands compared to your competitors? Read our SaaS churn rate benchmark article.

Gross churn vs. net churn: Key differences

When comparing gross churn and net churn, it’s essential to understand that each tells a different part of the story. As we've seen, gross churn gives you the raw data on revenue lost—it shows how much your company's recurring revenue is being affected by customers leaving or downgrading.

However, it doesn’t account for revenue gained through expansion revenue, which can be significant for SaaS companies focused on growth.

💡 On the other hand, net churn provides a clearer view of your business's overall financial health because it balances lost revenue with gained revenue from existing customers. This makes it the more accurate metric when evaluating net lost revenue or gained during a given period.

If your company has a high net churn rate, you need to focus on strategies to reduce customer churn and increase revenue growth from your existing customer base.

Comparing their impact on your strategy

Both gross churn and net churn play essential roles in shaping your customer retention strategy, but their impact differs.

Gross churn is valuable when you're focused on reducing logo churn rates and retaining more of your existing customers. It helps you identify how many customers you're losing and how much revenue lost is costing you.

However, net churn is often more critical when making strategic decisions because it reflects your total revenue. By considering expansion revenue, net churn shows whether your business is growing despite customer departures.

If your net churn is low or negative, you’re on the right track, even if gross churn is higher than you’d like.

When to use gross churn

Gross churn is most useful when you need to assess your customer churn independently of any revenue expansion from upgrades.

For example, if you’re trying to understand how much revenue lost is purely from customer attrition, gross churn is the best metric to use. It's also helpful for evaluating how effective your customer relationship management efforts are at preventing customer cancellations.

When to use net churn

Net churn becomes more important when you’re looking at overall revenue growth and want to factor in how much your existing customer base is contributing through upsells or cross-sells. If you’re trying to measure the balance between lost and gained revenue, net churn gives you a more holistic view of your business’s performance.

SaaS companies that rely on expansion revenue to drive growth will find net churn a better indicator of long-term success.

Example

Let’s say a SaaS business starts the month with $100,000 in monthly recurring revenue. Over the month, they lose $10,000 in revenue churn from departed customers. However, they gain $5,000 from expansion revenue, such as upgrades and cross-sells.

The gross revenue churn rate is 10%, but when factoring in the additional revenue, the net churn rate is 5%.

This means that while the company lost 10% of its MRR, the net revenue lost is only 5%, showing that revenue gained from loyal customers helped offset the impact of logo churn.

How to keep existing customers and reduce churn

Improve your customer onboarding process

A smooth and engaging onboarding process is vital to reducing customer churn. When new customers feel confident using your product early on, they're more likely to stay. SaaS businesses should provide clear tutorials, in-app guides, and personalized support during the first few interactions.

Early wins build customer satisfaction and set the stage for long-term retention. Think of it like teaching someone to ride a bike—help them find balance, and they'll stick around for the ride.

A well-designed onboarding strategy increases customer lifetime value and ensures customers see your product’s benefits quickly.

Read our SaaS onboarding checklist article here to see how 20+ top SaaS companies onboard their users.

Enhance customer support and engagement

Strong customer support is a cornerstone of customer retention. Proactive, responsive support ensures existing customers feel heard and valued, reducing the risk of customer churn. Engage regularly through personalized check-ins, helpful resources, and feedback loops to address issues before they escalate.

For tech companies, offering multi-channel support (live chat, email, etc.) gives customers flexibility in how they reach you. Happy, supported customers are more likely to stick with your product.

Remember, a little engagement goes a long way in building trust, strengthening relationships, and keeping customers from becoming another churn statistic.

Offer regular product updates and improvements

Consistently releasing product updates and improvements shows customers that your SaaS business is evolving and committed to their success. By addressing customer feedback and adding new features, you increase customer satisfaction and reduce churn rates.

Keep customers in the loop with release notes or in-app notifications to highlight these changes. Regular updates remind customers of the value you're adding, making them more likely to stay engaged with your product. Plus, expansion revenue opportunities increase as customers upgrade to access new features.

Continuous improvement leads to long-term customer retention and keeps your product competitive.

On the same topic, read 7 SaaS onboarding KPIs you can't miss.

Boost your monthly recurring revenue with Digi Storms

Do you know what’s better than reducing churn? Achieving net negative churn.

This means your expansion revenue—from upsells, cross-sells, and subscription upgrades—outweighs the revenue lost from churned customers. Instead of just plugging leaks, you’re actually growing your monthly recurring revenue (MRR) despite customer departures.

To get there, reducing churn is the first step. The best lever for this is an effective email marketing strategy. By sending personalized, timely emails, you can guide new users through a smooth onboarding, keep them engaged, and prevent customer cancellations. Regular email touchpoints reinforce your product’s value and build long-term loyalty.

But reducing churn is only part of the story. Email marketing can also drive revenue expansion by promoting upsells and cross-sells to existing customers. With the right targeted campaigns, you can introduce new features effectively, highlight subscription upgrades, and encourage customers to invest more in your product.

Let Digi Storms help you reduce churn, generate expansion revenue, and ultimately achieve net negative churn for sustainable business growth.

Request your strategy call today.