Churn Rate
Churn rate is the percentage of customers (logo churn) or revenue (revenue churn) that a SaaS business loses over a given period, typically measured monthly or annually; Monthly logo churn is calculated as the number of customers who cancelled in a month divided by the number of customers at the start of that month; Churn is a lagging indicator of product-market fit and customer success
Churn rate is the percentage of customers (logo churn) or revenue (revenue churn) that a SaaS business loses over a given period, typically measured monthly or annually. High churn counteracts new customer acquisition and sets a ceiling on achievable scale.
How it works
Monthly logo churn is calculated as the number of customers who cancelled in a month divided by the number of customers at the start of that month. Revenue churn tracks the MRR lost from cancellations and downgrades. At 10% monthly churn, a business loses roughly 70% of its base in a year, making sustainable growth nearly impossible.
Key facts
- Logo vs. revenue churn: Revenue churn matters more; losing a large account hurts more than losing many small ones
- Negative net churn: If expansion revenue exceeds cancellation revenue, net revenue churn is negative, a strong growth signal
- Benchmark: Best-in-class SMB SaaS targets under 2% monthly logo churn; enterprise SaaS under 5% annually
For builders
Churn is a lagging indicator of product-market fit and customer success. Reducing churn requires understanding whether customers are leaving because of missing features, poor onboarding, pricing, or competition, requiring cohort-level analysis rather than a single aggregate number.
Sources
- Bessemer Venture Partners. State of the Cloud annual report. bvp.com
- SaaStr. SaaS benchmarks and metrics archive. saastr.com
- Bain & Company. The Net Promoter System. bain.com
- KPMG. Private SaaS Company Survey. kpmg.com
- ChartMogul. SaaS metrics benchmarks and definitions. chartmogul.com
