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Churn Rate measures how quickly customers or revenue are lost over time. Learn how to calculate churn, benchmark it by stage, and apply retention strategies that drive sustainable SaaS growth.
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If growth is your engine, churn is the leak in your fuel tank.
Every lost customer — or dollar of recurring revenue — makes it harder to scale.
That’s why founders, operators, and investors track Churn Rate as closely as they track revenue growth.
Definition:
Churn Rate = (Customers Lost ÷ Customers at Start of Period) × 100
Ideal Range:
Recommended Tool: Churn Calculator
Churn isn’t just a number — it’s a story.
It reveals how much value customers perceive in your product and how consistently you deliver it.
A high churn rate doesn’t just slow growth; it compounds backward.
Each customer lost means future expansion potential vanishes, sales efficiency drops, and CAC payback stretches further.
Churn tells you:
Logo [Churn](/glossary#churn-logo-churn) = Lost Customers ÷ Starting Customers
Revenue [Churn](/glossary#churn-logo-churn) = (Lost [MRR](/glossary#mrr-monthly-recurring-revenue) – Expansion [MRR](/glossary#mrr-monthly-recurring-revenue)) ÷ Starting [MRR](/glossary#mrr-monthly-recurring-revenue)
Revenue churn provides a clearer view for SaaS because it accounts for upsells and cross-sells.
Example:
If you start the month with $500k MRR, lose $50k, but expand $30k:
Revenue [Churn](/glossary#churn-logo-churn) = (50 – 30) ÷ 500 = 4%
| Model | Average | Good | Best-in-Class |
|---|---|---|---|
| SMB SaaS | 4–6% monthly | <4% | <2% |
| Mid-Market | 2–4% monthly | <2% | <1.5% |
| Enterprise | 1–2% monthly | <1% | <0.5% |
| Usage-Based | Highly variable | <3% | <2% |
At scale, even small improvements matter.
Reducing churn from 4% to 3% monthly increases lifetime value by more than 25%.
Imagine two SaaS companies, both adding $100k MRR each month:
The difference? Retention.
Company B grows 50% faster simply because it retains more of what it earns.
Churn compounds negatively, but retention compounds positively.
Churn is often symptomatic, not causal — a lagging indicator of deeper issues.
Accelerate time-to-value. Customers who activate quickly are 2–3x more likely to renew.
Assign ownership. Build QBRs (Quarterly Business Reviews) and success plans.
Distinguish between avoidable (service, engagement) and unavoidable (industry, M&A).
Add integrations, workflows, and usage triggers that increase habitual use.
Conduct churn interviews and NPS follow-ups to uncover root causes.
| Metric | Description | Use Case |
|---|---|---|
| Net Dollar Retention (NDR) | Revenue retention after expansion | Overall health of existing base |
| Gross Retention (GRR) | Revenue retained before expansion | Baseline retention quality |
| Customer Lifetime Value (LTV) | Average revenue per customer lifetime | Links to profitability |
| Customer Health Score | Predictive churn model | Early intervention |
Each metric complements churn and helps you turn reactive churn analysis into proactive retention management.
Churn rarely happens overnight. Warning signs often appear months earlier:
Track leading indicators in your customer success dashboard — not just lagging churn events.
A 5% churn rate might be excellent for a high-volume SMB tool but disastrous for an enterprise platform.
Context matters.
Compare your churn not only across industry benchmarks but also within your customer segments.
Also consider gross vs. net churn:
A company with 5% gross churn and 8% expansion technically has –3% net churn, meaning the base is growing organically.
If growth is the outcome, retention is the engine.
See: Customer Success Playbook
Try: Churn Calculator
Assess: GTM Readiness Diagnostic
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