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Service Lifecycle

FAQ

    # Service Lifecycle

    In the subscription-based business world, one of the most crucial performance indicators is MRR (Monthly Recurring Revenue), a metric that shows how much predictable, recurring revenue your business generates each month.

    For companies using WHMCS, understanding how and when MRR is calculated and when it transitions into Churn is essential for accurate financial reporting, forecasting, and measuring business health.

    # What Is MRR and How to Calculate It

    MRR (Monthly Recurring Revenue) represents the total value of all recurring payments from subscription-based services.
    It provides a normalized monthly view of your revenue streams, regardless of whether customers pay monthly, quarterly, or annually.

    Formula:

    MRR = Sum of all monthly recurring service fees

    Examples:

    Billing Cycle Service Price MRR
    Annual $120 $10
    Quarterly $45 $15
    Monthly $60 $60

    Included in MRR:

    • Recurring subscription payments
    • Payments made using credits

    Excluded from MRR:

    • One-time fees (e.g., Setup, Late Fees, Taxes)

    # The Service Lifecycle in WHMCS

    Every WHMCS service follows a typical lifecycle — from creation, through suspension, to termination.
    Each stage determines how MRR and Churn are calculated.

    Common statuses:

    • Active - The service is paid and running.
    • Suspended - Temporarily disabled (usually due to unpaid invoices), but may still contribute to MRR depending on settings.
    • Terminated - Permanently closed. The service stops generating MRR and is counted as Churn.

    In addition to these statuses, a Grace Period may apply - the time after a due date during which the service can still be renewed before being treated as lost.

    Both Suspension and Termination delays can be configured in WHMCS → Setup → Automation Settings.
    These timeframes directly influence when a service transitions between Active, Suspended, and Terminated, and therefore when MRR stops being counted and becomes Churn.

    # Two MRR Calculation Modes

    WHMCS (and connected analytics tools like MetricsCube) can calculate MRR using two different logic models, depending on whether the MRR Calculation Based On Active Services option is enabled or disabled.

    # Mode 1: MRR Calculation Based On Active Services – ENABLED

    When this option is enabled, MRR is calculated based solely on service statuses.
    The Grace Period is ignored - the system looks only at whether a service is Active, Suspended, or Terminated.

    Status MRR Handling
    Active / Suspended MRR is counted
    Terminated MRR = 0 → becomes Churn

    Example 1:

    • Service created: May 1, 2025
    • Due date: June 1, 2025
    • Status changes to Suspended: June 6, 2025
    • Status changes to Terminated: July 1, 2025

    Result:

    • From May 1 to July 1 – the service contributes to MRR.
    • On July 1 – once terminated, MRR drops to 0 and is classified as Churn.

    This mode reflects the operational reality of your business.
    It measures MRR based on whether services are technically active or suspended, regardless of payment delays.
    Ideal for companies that continue to maintain infrastructure and customer access until services are officially terminated.

    # Mode 2: MRR Calculation Based On Active Services – DISABLED

    When this option is disabled, MRR calculations take the Grace Period into account.
    The system measures MRR from a financial perspective - focusing on whether the service is still within its allowed non-payment window.

    Rules:

    Condition MRR Handling
    Active / Suspended + within Grace Period MRR is counted
    After Grace Period or Terminated MRR = 0 → Churn

    Example 2:

    • Service created: May 1, 2025
    • Due date: June 1, 2025
    • Status changes to Suspended: June 6, 2025
    • Grace Period ends: June 20, 2025
    • Status changes to Terminated: July 1, 2025

    Result:

    • From May 1 to June 20 - the service generates MRR.
    • From June 21 - MRR = 0 → Churn begins (even if still Suspended).
    • From July 1 - Terminated status confirms Churn.

    This mode reflects financial accuracy - ideal for businesses that track revenue recognition or rely on financial reporting aligned with invoice due dates.

    # Practical Comparison

    Lifecycle Stage ENABLED (Status-Based) DISABLED (Grace Period-Based)
    Active / Suspended (before Grace Period ends) MRR MRR
    Active / Suspended (after Grace Period ends) MRR Churn
    Terminated Churn Churn

    # Why Accurate MRR and Churn Calculation Matters

    The moment you classify revenue as MRR or Churn directly impacts your analytics, growth metrics, and forecasts.

    • Counting Churn too early can undervalue recurring revenue.
    • Counting it too late can inflate active MRR and distort business decisions.

    With these two modes, businesses can tailor their approach to match internal goals:

    • Operational focus: count MRR as long as the service remains active or suspended.
    • Financial focus: stop counting MRR once the Grace Period expires.

    This flexibility enables:

    • More accurate forecasting and reporting
    • Better churn and retention analysis
    • Improved alignment between operations and accounting

    # Summary

    Calculating MRR in WHMCS is more than a mathematical task - it’s a strategic choice that defines how your company perceives recurring revenue and customer retention.

    Setting Logic Focus Perspective
    Enabled Based on service status Operational
    Disabled Based on Grace Period Financial

    Choosing the right approach allows your team to make smarter, data-driven decisions about growth, churn, and customer lifetime value - maintaining a clear view of your true recurring revenue.