Glossary
Churn Rate
Churn rate is the percentage of customers, subscriptions, or recurring revenue a business loses over a given period — typically a month or a year. Calculated as customers lost divided by customers at the start of the period, it's a core SaaS metric that measures how well a company retains the revenue it already won.
Last updated June 2026
How do you calculate churn rate?
The basic formula is customers lost during a period divided by customers at the start of that period, expressed as a percentage. If you begin the month with 500 customers and lose 25, your monthly customer churn rate is 25 / 500 = 5%. Pick a consistent period (monthly or annual) and decide whether to count only customers present at the start, since adding new customers mid-period to the denominator understates churn. Annual and monthly rates aren't interchangeable: roughly 5% monthly churn compounds to far more than 5% over a year, so always label the timeframe.
What's the difference between customer churn and revenue churn?
Customer churn counts logos — the share of accounts that cancel — treating every customer equally. Revenue churn measures the recurring revenue (MRR or ARR) lost from cancellations and downgrades, so losing one large account hurts more than losing one small one. Net revenue churn goes a step further by subtracting expansion revenue (upgrades, cross-sells, seat growth) from the lost revenue. When expansion outpaces losses, net revenue churn turns negative — often called net negative churn — meaning the existing customer base grows in value even with zero new sales.
Why does churn rate matter for SaaS?
In a subscription business, revenue depends on keeping customers, not just winning them, so churn directly caps growth: high churn forces sales to refill a leaking bucket before the company can grow net. Churn also shapes customer lifetime value — lower churn means a longer average lifetime and more revenue per customer — and signals product-market fit, onboarding quality, and satisfaction. Tracking churn by cohort, plan, and reason helps teams see whether losses come from poor fit, weak onboarding, or pricing, and where to intervene. A CRM that surfaces renewal dates and account health makes at-risk customers visible before they leave.
Frequently asked questions
What is churn rate?+
Churn rate is the percentage of customers, subscriptions, or recurring revenue a business loses over a set period, usually a month or a year. It's calculated as the number lost divided by the number at the start of the period, and it's a core SaaS metric for measuring how well a company retains the revenue it already earned.
How is churn rate calculated?+
Divide the number of customers lost during a period by the number of customers at the start of that period, then multiply by 100. For example, losing 25 of 500 starting customers in a month gives a 5% monthly churn rate. Always state the timeframe, since monthly and annual churn rates differ significantly once compounded.
What is the difference between customer churn and revenue churn?+
Customer churn counts how many accounts cancel, treating each one equally. Revenue churn measures the recurring revenue lost from cancellations and downgrades, so losing a large account weighs more heavily. Net revenue churn also subtracts expansion revenue from upgrades, and can turn negative when expansion outpaces losses.
What is a good churn rate?+
It varies by segment, but many SaaS companies target annual customer churn in the low single digits to mid-teens, with lower being better. Businesses serving larger enterprise accounts typically tolerate less churn than those selling low-cost, self-serve plans. The most useful benchmark is your own trend over time and across customer cohorts.
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