Churn Rate
Customer Churn Rate
Churn rate measures the percentage of customers or revenue lost over a specific period. For SaaS, monthly churn above 2% (24% annual) is a red flag — it means you're refilling a leaky bucket. Net revenue retention under 100% makes this even more critical.
A SaaS company starts January with 500 customers. During the month, 15 customers cancel. Monthly churn = 15/500 = 3%. If this continues, annual churn compounds to 31% — meaning they need to acquire 155+ new customers yearly just to maintain their base.
Churn is the tax you pay for bad onboarding, weak product-market fit, or ignored customer signals. Here's the uncomfortable truth: by the time a customer churns, you lost them 3-6 months ago. The cancellation is just the paperwork. If you're only measuring churn, you're measuring failure. The winners measure leading indicators — support tickets, feature adoption, NPS drops — and intervene before the decision is made. Also: gross churn vs. net churn matters. You can have 10% gross churn but 110% NRR if expansion covers it. Still worth fixing, but different urgency.
Define ItOther Definitions
“Churn rate is the percentage of customers or revenue that a business loses during a given time period. In SaaS, this is typically measured monthly or annually.”
“Customer churn rate represents the percentage of customers who cancel their subscriptions or stop doing business with you during a specific time frame.”
“Churn rate is a key SaaS metric that measures the rate at which customers cancel their recurring revenue subscriptions. It can be calculated by customer count or by revenue.”
“Churn is the silent killer of SaaS companies. A 5% monthly churn means you're replacing half your customer base every year just to stay flat.”
Churn rate quantifies the percentage of customers (customer churn) or recurring revenue (revenue churn) lost during a specific period. The distinction matters: losing 10 small customers has different implications than losing one enterprise account worth the same revenue. Gross churn counts all losses; net churn factors in expansion revenue from remaining customers. For B2B SaaS, acceptable annual gross churn varies dramatically by segment: SMB companies often see 20-40%, while enterprise-focused companies target under 10%. The compounding effect of churn is brutal — 5% monthly churn means losing 46% of customers annually. This is why churn reduction often delivers higher ROI than new customer acquisition.
MistakesCommon Mistakes
Measuring only customer count churn, not revenue churn (losing big customers hurts more)
Not distinguishing voluntary churn (cancelled) from involuntary churn (failed payments)
Ignoring churn leading indicators like decreased usage or support tickets
Celebrating low net churn while ignoring high gross churn masked by expansion
Using annual churn to hide monthly problems — 2% monthly = 24% annual
Churn above 2% monthly? That's a 24% annual leak.
Churn is a symptom, not the disease. We trace it back to the root cause — usually onboarding, expectation mismatches, or CS handoff failures.
Experience across
