Why measure it?

Expansion MRR shows how much you are providing additional services to existing clients, on top of the services they were already paying for previously.

This metric allows you to see the potential and opportunities your firm’s services have to offer. It's much more cost-effective to expand the services you provide to existing clients than to acquire new clients, so knowing this figure will highlight how well—or how poorly—your firm is at upselling and cross-selling your services.

Expansion MRR in action

2 clients agree to pay an additional $500 per month for CFO services, and another pays an additional $200 per month for tax planning, your Expansion MRR would be $1,200. If you began the month at $37,000, your new MRR would now be $38,200.

Churned monthly recurring revenue percentage (Churned MRR %)

What is it?

Churned MRR % looks at any reduction in MRR as a percentage of overall MRR. The reduction in MRR can be as a result of clients who decide they no longer need your services, from clients who decide to downgrade the services you provide to them, or from clients that your firm has decided to fire.

Why measure it?

Knowing this figure highlights areas where you lose revenue and how that affects your bigger picture.

Churned MRR is not necessarily a result of a client not being satisfied with your firm’s services—it might mean that client went out of business or you fired them because they were proving inefficient. But a Churned MRR figure that grows will highlight larger problems that you must address.

Measuring your Churned MRR as a percentage of your overall MRR will show you more about what this lost revenue means. 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?

Churned MRR in action

If your current MRR is $38,200 and 1 client paying $1000 each month decides to switch accountants, your churned MRR % is 2.6%. This percentage does not sound alarm bells, however, you should monitor it constantly over time to ensure it does not grow, and explore what type of clients are downgrading their services or no longer require your services.

Client churn rate

What is it?

Also known as attrition rate, your client churn rate counts your percentage of clients lost (as opposed to churned MRR, which measures their lost revenue value). Usually, it makes more sense to factor in only consistent monthly clients, not one-off clients.

Why measure it?

Knowing your client churn rate highlights areas where revenue is lost. To grow, the number of new clients you acquire must exceed your churn rate.

When your churn rate steadily grows, you know you have a problem. Like your churned MRR %, understanding your client churn rate requires you to look at your sources of churn to properly understand whether you have an issue that needs addressing.

Client churn rate in action

Divide your number of clients 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, on average, each client is contributing to your top line.

Why measure it?

ARPC is an extremely handy metric to know because it indicates if your practice is growing 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 efficiently?

When you have an understanding of your ideal client and have tailored your services and sales and marketing activities to reach them, your ARPC will tell you how well you are achieving that.

This metric also allows you to segment your clients to determine the effectiveness and combined revenue of your different client types and service offerings.

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. This is interesting to know, but knowing your ARPC becomes even more meaningful when you can monitor its change over time, with a detailed understanding of who your ideal client is.