Your business achieves net negative churn when your expansion revenue outpaces the revenue you lose from churning customers. While +4% churn means you’re losing 4% of your recurring revenue each month, -4% churn means you’re gaining 4% of additional recurring revenue each month, without adding new customers.

If you are able to achieve net negative churn, you have an incredible business. You can add zero customers in a month but still grow. If you continue adding new customers, net negative churn becomes a massive flywheel that helps your business grow faster and faster.

It’s pretty magical to see. Not to mention that upselling existing customers is a lot cheaper than acquiring new ones, so your CAC decreases and profitability increases.

It’s challenging to get to net negative churn purely by growing expansion revenue, though. You also need to do the work we talked about above to get your gross churn down to reasonable levels (in the 0% to 3% range).

When I owned HitTail, an SEO keyword tool, I structured my pricing using the value metric of website visitors. Once a customer went from 10,000 to 20,000 page views (or 20,000 to 50,000), they bumped up to the next tier.

The problem was that it didn’t happen as often as I expected. And because HitTail was a fairly inexpensive tool, our churn was around 8%. Our 3% expansion revenue was a nice offset, but it didn’t help us achieve net negative churn.

On the other hand, I recently spoke with a company that uses an API credit system in which the more calls a customer makes to their API, the more they pay. Like HitTail, it has a 3% expansion revenue. But because its product is high-priced and their churn is low (2%), that’s enough to get them to 1% net negative churn.