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If You Count Committed Revenue, Should You Count Committed Churn?

Learn how to adjust CARR when customers say they’re not going to renew.

CARR (Committed Annual Recurring Revenue) is a B2B SaaS metric that is growing in popularity, especially for fast-growing businesses.

It’s very similar to ARR, but instead of only including deals that are live, it also includes signed deals that haven’t started yet.

That means that if you use CARR as your primary metric, then you’re choosing to count recurring revenue based on a customer’s commitment, even before the service begins.

But, if you go down this path, do you have to follow the same reasoning when it comes to churn?

For example, if a customer tells you they won’t be renewing, do you take them at their commitment and count them as churn right away? Or, do you simply wait until the contract expires to count them?

Do you need to count committed churn?

Here’s the key thing to consider:

When a customer tells you they’re going to churn, do they end up following through?

If these customers do end up churning, then you should absolutely count them as committed churn. This will keep you from overstating your CARR and is the safe way of calculating committed revenue.

However,​​ if there’s a reasonable chance that the renewal can be saved, then we recommend that you don’t count them as committed churn yet.

For example, maybe you have a stellar Customer Success team who excels at coming in to save the day. Or, maybe your customers simply use this as a strategy to get a better deal on their renewal.

Whatever the case may be, look at your data and let it guide your decision.