Churn Rate

Definition

Churn rate is the share of clients, or of recurring revenue, that an MSP loses over a period, usually a year. Logo churn is clients lost divided by clients at the start of the period. Revenue churn is MRR lost from departed clients plus downgrades, divided by MRR at the start. The two diverge whenever the clients you lose are larger or smaller than average, so track both.

Why it matters to an MSP

Churn sets the ceiling on growth. An MSP adding $30,000 of new MRR a year against 10% revenue churn on a $500,000 base is losing $50,000 and shrinking; against 4% churn it is growing. Because labor and tooling costs do not fall when a client leaves, lost MRR comes almost entirely out of margin, and replacing it costs more than keeping it – a new SMB client typically consumes several months of its MRR in sales and onboarding labor before turning profitable.

Typical ranges for an SMB-focused MSP: annual logo churn under 5% is top-quartile, 5–10% is normal, and above 10% points to something structural – pricing, service quality, or the client base. Revenue churn should sit at or below logo churn; if it is higher you are losing your best accounts. Net revenue retention above 100% – upsells outpacing losses – is the mature-book target. Separate the causes: clients acquired, closed, or out of business are outside your control; those who left for a competitor or took IT in-house are the number to work on, and each deserves an exit interview. Track it monthly in your PSA on a trailing twelve-month basis, next to QBR coverage – clients who skip reviews leave without warning. The retention playbook is in client retention and churn.

Related terms: MRR, QBR, Client Offboarding