Churn Rate
The percentage of customers or revenue a company loses over a given period, typically measured monthly or annually.
Churn rate measures attrition — either the percentage of customers who cancel (logo churn) or the percentage of recurring revenue lost to cancellations and downgrades (revenue churn) over a defined period. Low churn is essential for a healthy recurring-revenue business, since high churn forces a company to constantly replace lost revenue just to stand still, let alone grow.
Logo churn and revenue churn can tell very different stories: a company can lose a lot of small customers (high logo churn) while retaining nearly all its revenue if its largest accounts stay, which is common in businesses with concentrated enterprise customers alongside a long tail of smaller ones.
Churn decides whether growth is real. A company growing fast while losing a large share of its revenue base every year is mostly on a treadmill, replacing what leaked out. Low churn compounds instead: retained customers expand, refer others, and cost nothing to reacquire, which is why investors pay up for best-in-class retention.
Annualize churn with compounding rather than multiplying by 12, and always state the period. A 3% monthly churn rate means losing about 30.6% of customers over a year (1 - 0.97^12), and mixing up monthly and annual figures describes a completely different business.
Involuntary churn — customers lost to failed payments, expired cards, or billing errors rather than a decision to leave — is the cheapest churn to fix with dunning emails, card-updater services, and payment retries, yet many companies lump it in with voluntary churn and never address it.
Monthly churn rate = customers (or revenue) lost during the month / customers (or revenue) at the start of the monthA company starts the month with 500 customers and loses 15 to cancellation during the month. Monthly logo churn = 15 / 500 = 3%, which annualizes to roughly 30% if that rate holds steady.
Segment churn by customer cohort, contract size, and time-since-signup rather than reporting one blended number — early-tenure churn (customers leaving in their first 90 days) usually signals an onboarding problem, while later churn often signals a product-value or competitive problem, and the fixes are completely different.
What's a good monthly churn rate for a SaaS company?
Under 1% monthly (roughly under 12% annualized) is considered strong for B2B SaaS, though acceptable churn varies by customer segment — SMB-focused products typically tolerate higher churn than enterprise-focused ones.
What's the difference between gross revenue retention and net revenue retention?
Gross revenue retention measures revenue kept from the existing base, excluding expansion, so it can't exceed 100%. Net revenue retention adds expansion from upsells and cross-sells and can exceed 100%. GRR shows whether the product holds its ground; NRR shows whether the account base compounds.
What is involuntary churn?
Churn caused by failed payments rather than deliberate cancellation. It's usually fixable with dunning, card updaters, and retry logic.
Can logo churn be high while revenue churn is low?
Yes. Hypothetically, a company with 500 customers at $2,000 a month loses 15 customers paying $500 a month: logo churn is 3% for the month, but revenue churn is only $7,500 of $1M, or 0.75%. It's losing small customers while the revenue base holds — survivable, but worth understanding.
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