Heads up! To view this whole video, sign in with your Courses account or enroll in your free 7-day trial. Sign In Enroll
Well done!
You have completed Introduction to Churn and Lifetime Value (LTV) Analysis!
You have completed Introduction to Churn and Lifetime Value (LTV) Analysis!
Preview
We apply our learnings in a practice problem related to MRR Churn.
Example Files
Related Discussions
Have questions about this video? Start a discussion with the community and Treehouse staff.
Sign upRelated Discussions
Have questions about this video? Start a discussion with the community and Treehouse staff.
Sign up
Earlier in the course, we introduced MRR,
or monthly recurring revenue.
0:01
This is the revenue we get from
customers who are paying us monthly.
0:06
How much customers pay us each
month can depend on many factors.
0:10
For example, let's pretend we
are a software company that is used for
0:14
project management.
0:18
We charge our customers a fee based
on the number of active users
0:20
they have each month.
0:23
So take a minute to think about that.
0:24
We are a project management software
company, and we charge our customers
0:27
a per-user fee based on whether or
not the user is active in a given month.
0:32
Go ahead, pause the video, and think
of all the different possibilities for
0:39
the changing amounts billed there.
0:43
Okay, welcome back, so
0:46
let's just talk through some of
the different possibilities here.
0:48
Last month, we charged a customer for
all their active users.
0:52
In the current month,
0:56
we might charge a customer more if
they hired a bunch of new employees.
0:57
Or if in the previous month, they only
had a few teams using our software, but
1:01
this month,
they have a bunch of new projects, and
1:06
thus additional team members
started to use our software.
1:09
Or perhaps it's in reverse, and we are
charging less for the opposite reasons.
1:12
A la the customer had to do a layoff or
1:17
the number of teams using
our software declined.
1:20
This is all customer specific, and will
naturally vary a lot depending on company
1:23
size, age, and to what extent they've
adopted the project management software.
1:28
If we have a lot of
customers of varying sizes,
1:34
the amount of money we can charge
our customers could vary widely.
1:38
Or might not be as noticeable as
we are looking at a large group.
1:42
Okay, let's start walking through
this with a gross churn calculation.
1:47
We know what our existing customers
paid us in MRR last month.
1:52
Some accounts are large and some accounts
are small in terms of what they pay us.
1:56
But we will capture all of them
in our total MRR calculation.
2:01
So whatever they paid us in aggregate
last month is our beginning of month MRR.
2:06
Unfortunately, we had some
customers cancel their accounts.
2:13
So whatever they paid us last month,
2:17
they aren't paying us this month,
we would call that cancelled MRR.
2:19
Let's pretend we had 10
customers that paid us a total
2:25
of $34,500 in MRR last month.
2:29
One is relatively huge and
pays us $10,000 each month.
2:33
Eight are medium sized and, believe it or
2:37
not, they all pay us the same
amount of $3,000 a month.
2:39
And one is small and pays us $500 a month.
2:43
Let's practice some churn calculations.
2:47
Can you tell me what the gross MRR churn
is if we lose two medium sized customers?
2:50
What about just the gross churn?
2:55
What is the gross MRR churn,
if we lose our one big customer?
2:57
The same for just gross churn.
3:02
Go ahead and
work through those calculations, and
3:05
we'll talk through it in our next video.
3:07
You need to sign up for Treehouse in order to download course files.
Sign upYou need to sign up for Treehouse in order to set up Workspace
Sign up