Measuring the Churn the Scorecard Missed
Owner-operated B2B software and digital-services company | About 88% recurring revenue | Fractional CFO: revenue integrity, product-line margins and retention | May 2026 to present
At a glance
The situation
About 88% of the company’s revenue was recurring, and annual revenue had declined since 2023. The engagement began with a diagnostic in May 2026, then a monthly fractional CFO retainer covering the revenue model, retention, a three-statement forecast and reporting.
The reporting had gaps:
- The management scorecard counted only the cancellations caught that week ($1,661.59 in June 2026, $1,525.50 in July), and its retention-rate row was blank.
- The books tracked which salesperson closed each deal, not which product line it belonged to, so no line showed its margin.
- New monthly fees could miss a launch: a site launched in June went unbilled in July and August.
What we did
- Tied collections to booked revenue, April 2024 to December 2025 (by July 6, 2026)
- Measured retention and what churn costs, took the CEO through it in a working session (July 14), weighed a customer success hire (July 17) and wrote the one-page churn summary the CEO asked for (July 29)
- Measured payroll and server cost by product line, then built and audited a contribution margin analysis (August 25 to 28)
- Built and audited a three-statement forecast model (August and September)
- Built a retention call list (September 8), and from October 6 a biweekly retention report for the team member assigned to retention
- Built a sales dashboard, refreshed every 2 weeks, that compares signed deals with the signing pace that keeps billing flat
- Built a monthly billing audit and re-read August against production and client records (September 23)
What we found
- Revenue that ties to the bank. Collections tied to booked revenue within 0.03% from April 2024 to December 2025.
- Margin by product line. From July 2025 to June 2026, software subscriptions earned an 80.1% contribution margin and website builds 29.1%. Operating income in the analysis ties to the books exactly.
- The churn the scorecard missed. Gross revenue retention was 73.4%, against an 85%+ category benchmark. Staying flat took $124,446 of bookings a month, measured in July 2026.
- Where to start. The September 8 call list covered 17 accounts with $385,307.80 of contract value; its 7 priority accounts carried $151,073 a year of live exposure.
- Fees that missed billing. In August, 3 accounts had a recurring billing gap of $2,734.76 a month ($32,817 a year).
Results so far
- The read, confirmed. On July 14, 2026, the CEO confirmed the retention read.
- A person on retention. On September 4, 2026, the CEO assigned a team member about 15 hours a week to retention.
- Priority accounts. On October 6, 2026, all 7 priority accounts were still billing at unchanged run rates.
- Billing checked monthly. On September 22, 2026, the CEO agreed that accounting will get monthly launch and go-live reports. The billing audit is scheduled monthly on the 6th, starting October 6.
How we measured this: the company’s figures come from its books, collections and client records; the engagement is ongoing, so the results are those achieved so far.
What it means
Counting only the cancellations caught each week makes churn look small. Measured across the recurring base, churn sets how much a company has to sign just to stand still.