What is Churn Rate?
Churn rate is the percentage of customers or revenue lost over a given period. Customer churn (logo churn) measures the percentage of customers who cancel. Revenue churn measures the percentage of recurring revenue lost.
Churn is the silent killer of SaaS businesses. Even small churn rates compound dramatically. At 5% monthly churn, you lose 46% of your customers annually. At 3% monthly churn, you lose 31%. This means you need to acquire that many new customers just to stay flat.
Net revenue churn accounts for expansion revenue. If your customers who stay are upgrading enough to offset losses from cancellations, you achieve negative net churn — the holy grail of SaaS where your existing customer base grows without any new acquisitions.
Why It Matters
Churn determines the ceiling of your SaaS business. No amount of customer acquisition can overcome high churn. Reducing churn from 5% to 3% monthly has a bigger impact on enterprise value than doubling your sales team.
Frequently Asked Questions
What is a good churn rate for SaaS?
For B2B SaaS: <2% monthly or <5-7% annual logo churn is good. For enterprise SaaS: <1% monthly. Negative net revenue churn (expansion exceeds losses) is the gold standard.
How do you calculate churn rate?
Monthly churn rate = customers lost during month ÷ customers at start of month × 100. Revenue churn = MRR lost ÷ MRR at start of month × 100.
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Richard Ewing is a Product Economist and AI Capital Auditor. He helps companies translate technical complexity into financial clarity.
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