Business Tools Blog

If you read the Bear’s Disconnect Inferno blogs, you read how important it is to “Keep Score.”  Caruso writes:

This sugarcoat tendency happens in various areas of business reporting–but it is likely more prevalent in the area of disconnects than in most other areas. Why? First, ascertaining disconnects and validating reporting is tedious. Second, it is highly unlikely the auditors, board of directors, shareholders or even CEO will tune into reporting methodology until problems become pronounced. By the time the problem is big, it is usually too late. The company now is in crisis mode.

Churn includes disconnects, negative re-rates, increased discounts, and any other transaction that decreases revenue on a recurring go-forward basis.  If churn isn’t tracked correctly you are kidding yourself and your investors.  Not reporting disconnects correctly, doesn’t lessen their impact to revenue.

So … how do we track disconnects at Zayo?

We start with unambiguous definitions.  By defining churn as any decrease to recurring revenue, we ensure that all information is captured.

Monthly MRR Churn = any negative change in Billable Monthly Recurring Revenue (BMRR) during the month.

• BMRR = one full month’s value of all services.  BMRR does not adjust for pro-rates, backbills, credits or other financial statement revenue adjustments.
• Disconnects = any service that went to $0 during the month.
• Negative Re-Rate = any active service where the BMRR decreased during the month.
• Discounts = any service where the monthly discount increased during the month.
• Other Changes = any churn that was not reported as a disconnect, negative re-rate or discount.  (This is the category that typically get’s missed when data is incomplete)

Churn Percent is used to judge a company’s health.  A lower churn percent means that your company grows revenue faster because there isn’t as much lost revenue to replace every month.   Churn percent is calculated by dividing Monthly Churn by the BMRR on the first day of the month.

How do we measure every negative change in MRR?  You’ll have to wait for tomorrow’s post.