Churn Rate
The percentage of customers or revenue lost over a given period. The inverse of retention, churn rate measures how quickly your customer base or revenue is eroding.
Churn Is the Tax on Growth
Every SaaS company pays a churn tax. If you have 5% annual churn and $10M ARR, you need to add $500K just to stay flat. At 20% annual churn, you need $2M in new ARR just to replace what you lost. High churn turns your growth team into a maintenance team — running hard just to stay in place.
The Compounding Damage of Churn
Churn compounds. A 3% monthly churn rate does not mean you lose 36% annually — it means you lose about 30% (1 - 0.97^12). At 5% monthly churn, you lose 46% annually. Small differences in monthly churn create massive differences in annual retention. Cutting churn from 5% to 3% monthly nearly doubles the lifetime of your average customer.
Where Churn Actually Happens
Most churn does not happen at renewal. It happens in the first 90 days. Customers who fail to onboard, fail to activate, or fail to find value leave quickly. After 6 months of active usage, churn drops dramatically. This means the biggest anti-churn investment you can make is in onboarding and time-to-value, not in save teams and retention offers.
Involuntary Churn
Between 20-40% of SaaS churn is involuntary — failed credit cards, expired payment methods, billing errors. This is free money you are leaving on the table. Implement dunning emails, smart retry logic, and card update reminders. Reducing involuntary churn is the easiest retention win in SaaS.
Frequently Asked Questions
What is a good churn rate for B2B SaaS?
Monthly logo churn under 2% (under 22% annualized) for SMB SaaS. Under 1% monthly (under 11% annualized) for mid-market. Under 0.5% monthly (under 6% annualized) for enterprise. Revenue churn should be even lower because larger accounts tend to be stickier.
How do you calculate monthly churn rate?
Customers lost during the month divided by customers at the start of the month. If you started with 500 customers and lost 10, your monthly churn rate is 2%. For revenue churn, use churned MRR divided by beginning MRR. Always use beginning-of-period denominators, not averages.
What is the difference between logo churn and revenue churn?
Logo churn counts customers lost regardless of size. Revenue churn measures the dollar value lost. You can have high logo churn (lots of small customers leaving) but low revenue churn (big customers staying). Revenue churn is more important for business health; logo churn reveals product-market fit issues.
