What Is Negative Churn and Why It Matters for B2B SaaS

Typically, when people hear the word “negative,” they think of something bad. This holds true in B2B SaaS as well - terms like negative revenue or declining user numbers usually signal trouble ahead.

However, negative churn stands out as an exception. Instead of a warning sign, it’s actually a positive indicator that your business is thriving and expanding organically.

In this guide, we will explore the concept of negative churn, how to calculate it, why businesses would aim for it, and some practical tactics to help you achieve it.

What is negative churn?

Negative churn occurs when the additional revenue generated from existing customers - through upsells, cross-sells, or expansions - exceeds the revenue lost from customers who downgrade or cancel their subscriptions during the same period.

How to calculate negative churn?

Negative churn is measured through a metric called Net Revenue Retention (NRR). It reflects how much revenue you retain and expand from your existing customer base over a given period without factoring in new customer acquisitions.

Here’s the formula for calculating NRR:

NRR = (Starting MRR + Expansion – Contraction – Churn) / Starting MRR × 100

Where:

• Starting MRR is the Monthly Recurring Revenue at the beginning of the period

• Expansion is revenue from upsells, cross-sells, seat increases, or usage-based growth

• Contraction is revenue lost due to downgrades

• Churn is revenue lost from full cancellations

If your NRR is over 100%, you’ve achieved negative churn. That means your existing customers are growing in value faster than you’re losing revenue from them, leading to revenue growth without relying on new customer acquisition.

What makes negative churn different from simply increasing MRR?

Monthly Recurring Revenue (MRR) is a SaaS metric that tracks the total revenue your business earns from subscriptions each month. You can grow MRR by bringing in new customers, upgrading existing ones, or adjusting your pricing. It’s a simple, high-level measure of your revenue, and it’s often the first thing teams look at when understanding growth.

Negative churn, on the other hand, is a specific outcome: it happens when your existing customers spend so much more over time that it outpaces the revenue you lose from churning customers and downgrades. This leads to a Net Revenue Retention (NRR) of over 100%, meaning your customer base is growing in value instead of in number of customers.

Why would businesses want to achieve negative churn?

Every SaaS business will experience some level of churn. Customers may cancel due to budget cuts, internal changes, or shifting priorities, and that’s often unavoidable. What can be influenced is your recurring revenue.

So, if your business is already experiencing churn, you might as well aim for negative churn. It allows your revenue to grow even if some customers leave. By expanding existing accounts through upsells, cross-sells, or increased usage, you offset the losses from churn and build a more stable, scalable business.

Here are the main benefits of this approach:

• Negative churn supports sustainable revenue growth. Even if some customers leave, your total revenue can still increase through expansion from retained customers.

• It allows you to focus more on high-value customers. With fewer accounts to manage, your team can provide more attentive support and better service.

• It increases the customer lifetime value of your existing customers. Customers who grow with your product over time tend to spend more and require fewer resources to retain.

How to achieve negative churn?

Let’s look at some actionable tactics that can help you increase revenue from existing customers and reduce the impact of churn:

1. Upsell to higher plans

Upselling occurs when you offer a customer the opportunity to upgrade to a more premium plan.

For example, a small business may start with your social media marketing tool to schedule basic posts across two channels. As their brand gains traction, they want to manage more profiles, add more team members, and analyze engagement metrics. So, they would upgrade to a higher-tier plan that includes multi-user access, content approval workflows, and advanced analytics.

Here are a few tactics to drive upsells:

• Premium feature trials: Offer temporary access to premium features so customers can experience the value firsthand.

• Behavior-based triggers: Suggest upgrades when customers reach usage limits, like storage capacity or user seats.

• Customer success-driven upsells: Use customer success managers and teams to identify upsell opportunities.

2. Cross-sell complementary products or features

Another way to grow revenue from existing customers is to help them solve adjacent problems as they arise with additional services.

For example, a customer might start with your tool to manage their internal communication. A few months later, they want to automate routine announcements like birthdays, holidays, or policy updates. That’s a natural moment to offer a simple scheduled broadcast add-on, not as a sale, but as a solution to a problem they now care about.

Here are some tactics to encourage cross-selling:

• Contextual nudges: Promote add-ons when users encounter related pain points (e.g., showing scheduling tools after repetitive manual tasks).

• Bundle upgrades: Offer discounted packages when customers buy multiple features together.

3. Pay-as-you-go pricing

Pay-as-you-go models encourage customers to grow their usage naturally, leading to higher revenue without forcing immediate plan upgrades. By aligning pricing with actual consumption, you create opportunities for expansion.

For example, a customer may start with a basic subscription and gradually increase their API calls or storage as their business grows. Instead of needing to buy a new plan, they simply pay for the additional usage, making it easy and frictionless to scale.

Tactics to encourage usage-based growth:

• Auto-scaling options: Let customers opt into automatic scaling to prevent service interruptions without manual upgrades.

• Usage alerts and notifications: Send automated alerts at key milestones (e.g., 70%, 90% usage) to prompt customers to consider increasing their limits.

Final thoughts

While achieving negative churn doesn’t happen overnight, it’s a goal well worth chasing. By combining strong retention practices with intentional upsell, cross-sell, and pricing tactics, you can build a revenue engine that scales even without constant new customer acquisition.

In the long run, this approach not only drives revenue growth but also strengthens your market position and builds a loyal community that champions your brand.