Churned monthly recurring revenue percentage (Churned MRR %)
What is MRR?
Churned MRR % looks at any decrease in MRR as a percentage of the whole MRR. The reduction in MRR can be an outcome of clients who decide they no longer need your services, from clients who chose to reduce the services you offer to them, or from clients that your firm has chosen to dismiss.
Why measure MRR?
Realizing this figure emphasizes areas where revenue decreases and how that affects your broader picture. Churned MRR isn’t necessarily because of a client not being happy with your firm’s services—it might indicate that the client went out of business or you dismissed them because they were proving incompetent. But a Churned MRR figure that increases will emphasize bigger issues that you must deal with.
You should look at it together with details of lost clients—are you losing a few big clients or many little clients? Or worse, are you losing several large clients? Determining your Churned MRR as a percentage of your overall MRR will indicate to you more about what this lost revenue signifies.
Churned MRR in action
If your current MRR is $38,200 and you have 1 client paying $1000 each month that decides to switch accountants, your churned MRR % is 2.6%. This percentage doesn’t create an immediate issue; however, you should observe it continuously over time to make sure it doesn’t increase, and search what type of clients are downgrading their services or no longer require your services.
I watch my MRR grow and my churn. We have almost no churn because we don’t accept everyone who wants to sign up.
Client churn rate
What is it?
Also known as attrition rate, your client churn rate counts your percentage of clients lost (opposite to churned MRR, which determines their lost revenue value). Usually, it makes more sense to factor in only consistent monthly clients, not one-off clients.
Why measure it?
Like your churned MRR %, being aware of your client churn rate needs you to review your sources of churn to properly understand whether you have a concern that requires your attention.
Understanding your client churn rate emphasizes areas where revenue is lost. To increase, the number of new clients you acquire must surpass your churn rate. When your churn rate progressively increases, you know you have an issue.
Client churn rate in action
Divide the number of clients you lost, by your total number of clients. If you lost 1 client this month out of 36, your client churn rate is 2.8%.
Average revenue per client (ARPC)
What is it?
ARPC tells you how much typically each client is supplying to your top line.
Why measure it?
This metric also allows you to divide your clients to decide the effectiveness and combined revenue of your different client types and services.
ARPC is a very convenient metric to understand because it shows if your practice is developing or not, and why. Are you aiming your business at higher paying customers—and probably less of them? Or are you aiming for volume—lots of bookkeeping clients that you can service very effectively? Your ARPC will show you how well you are achieving that, when you have an understanding of your ideal client and have tailored your services and sales and marketing activities to reach them.
ARPC in action
Dividing your MRR by your total number of clients gives you your ARPC. If you have 35 clients and a current MRR of $37,200, your ARPC would be $1063. Most importantly, knowing your ARPC becomes even more significant when you can observe its change over time, with a particular knowledge of who your ideal client is.
