What Is Churn Rate?
Churn rate is the percentage of customers (or revenue) that cancels in a given period — the single most important health metric for a subscription SaaS business.
Churn is the rate at which customers stop paying. A 5% monthly churn sounds small — but it means you lose half your customer base every year. Every growth strategy is undermined if you can't retain the customers you acquire.
How to calculate churn rate:
Monthly Churn Rate = (Customers Lost in Month / Customers at Start of Month) × 100
Example: 100 customers at start, 5 cancel → 5% monthly churn
Customer churn vs. revenue churn:
- Customer churn — percentage of customers who cancel
- Revenue churn (MRR churn) — percentage of MRR lost to cancellations
- Net revenue churn — revenue churn minus expansion revenue from upgrades
Negative net revenue churn (expansions exceed cancellations) is the holy grail — your existing customers generate more revenue over time even if some cancel.
Good churn benchmarks:
- B2B SaaS: 1–2% monthly (12–22% annually)
- B2C SaaS: 3–7% monthly (high is normal due to individual customers)
- Enterprise: <1% monthly
Common causes of churn:
- Poor activation — users never reach the "aha moment"
- Missing features that were promised
- Better alternative emerged
- Business customer went out of business
- Billing failure (involuntary churn) — always set up retry logic
Reducing churn: Involuntary churn (failed payments) is the easiest to fix — Stripe's Smart Retries and dunning emails recover 20–40% of failed renewals automatically.