Xro - xero

[swandri]

4% monthly churn ≠ 40% annual churn.

Month	New customers	Leaving customers	Churn
Jan	100	4	4%
Feb	100	4	4%
Mar	100	4	4%
Apr	100	4	4%
May	100	4	4%
Jun	100	4	4%
Jul	100	4	4%
Aug	100	4	4%
Sep	100	4	4%
Oct	100	4	4%
Nov	100	4	4%
Dec	100	4	4%
	1200	48	4%

[twotic]

swandri,

At the risk of getting scolded again for making sure everyone is on the same page re these churn rates.

From the XRO report:

"Customer churn is the number of customers who leave Xero in a month as a percentage of the total customers at the start of that month."

In your calculation you are only calculating (and then summing) the number of customers lost as a percentage of new customers each month - what about the "total customers at the start of that month"

You will find you get quite a different answer if you calculate customers lost based on the total customers at the start of each month.

[Xirr]

Did you guys do maths at school??

yeah guys - churn is a measure of how many people left that were customers at the start of the period - it defeats the purpose by adding new customers to the calculation (and by doing so you are starting to compare apples to oranges). The point is to measure loyalty/stickiness of existing customers.

Other people have already illustrated the calculations but using the USA 4% monthly churn - a reasonable approximation of annual churn might be 100% - (96% x 96% x 96% x 96% x 96% x 96% x 96% x 96% x 96% x 96% x 96% x 96%) = ~39%

Cheers

[winner69]

p.s. if you want to calculate future customers taking account of existing customers, new customers AND churn, you need to ideally use a component cohort model...

That'll stuff them up, but I don't think they teach such stuff in maths at school these days. Probably need to go to uni eh.

[winner69]

I don't have access to some of my historical data, but just to clarify, 18,000 to 22,000 is for the 6 months to Sep 30 2014 right?

If so, assuming a constant net growth rate in customers over time, and an average monthly churn rate (as per recent announcement), I get 4940 defections and 8940 new customers.

Out of interest what formula are you using to get your numbers (Winner & Mikey)?

My original calcs more mental arithmetic and rather simplistic. I apologise for that

Using your assumptions I get close to your numbers.

Lets forget the maths and just agree in round terms in North America for every two customers Xero sign up one existing customer defects (and that's painting a slightly rosier picture than the numbers suggest)

[BFG]

*SIGHS*

Really guys, this day in age?

http://bit.ly/1zIDsnW

[winner69]

*SIGHS*

Really guys, this day in age?

http://bit.ly/1zIDsnW

SIGHS

So which of many do you reckon we should use

I see the Xero way not picked up Google

[twotic]

My original calcs more mental arithmetic and rather simplistic. I apologise for that

Using your assumptions I get close to your numbers.

Lets forget the maths and just agree in round terms in North America for every two customers Xero sign up one existing customer defects (and that's painting a slightly rosier picture than the numbers suggest)

Cheers mate, yeah the States is an interesting one, but if you apply some logic to that one you can see how churn improves as geographical markets become more mature. It's a shame we don't have historical data on churn for NZ, OZ, and the UK, it would be interesting to see how they compared in the early stages of growth, my guess is they may have been quite similar to the US (probably not quite so high due to differences in business culture and market environment). Churn will certainly come down in the US though, give it a couple of years and I would say it will be well under 3%.

[BFG]

SIGHS

So which of many do you reckon we should use

I see the Xero way not picked up Google

I'm pretty sure we're all big boys here and can make BIG DECISIONS all by ourselves!

[Casino]

Cheers mate, yeah the States is an interesting one, but if you apply some logic to that one you can see how churn improves as geographical markets become more mature. It's a shame we don't have historical data on churn for NZ, OZ, and the UK, it would be interesting to see how they compared in the early stages of growth, my guess is they may have been quite similar to the US (probably not quite so high due to differences in business culture and market environment). Churn will certainly come down in the US though, give it a couple of years and I would say it will be well under 3%.

It may even drop in the short-term. My suspicion is that the H&R Block deal didn't go down well costing them a few partners over the last few months. May also be the reason why Karpas got the boot. But that's a one-off and out of the way now. Churn will always sit a bit higher in the US because of direct business but I see that as a positive.