Churn Rate
The percentage of customers or revenue you lose over a given period.
What it means
Churn rate measures the rate at which customers cancel their subscriptions or stop paying. It comes in two flavors: customer churn (percentage of accounts lost) and revenue churn (percentage of MRR lost). Revenue churn is generally more important because losing a $500/mo customer hurts more than losing a $10/mo customer, even though both count as one in customer churn.
Formula
Customer Churn = (Customers lost in period ÷ Customers at start of period) × 100%
Why it matters
High churn kills SaaS businesses silently. Even if you're adding customers every month, a churn rate above 5-7% monthly will keep you on a treadmill. Reducing churn by even 1% compounds dramatically over time and is usually cheaper than acquiring new customers.
What is churn rate?
Churn rate is the percentage of customers (or revenue) that leave your product during a specific time period. It's the opposite of retention.
What is a good churn rate for SaaS?
For B2B SaaS, a monthly churn rate of 3-5% is average for early-stage. Best-in-class companies achieve under 2% monthly churn. Enterprise SaaS often targets below 1%.
How do you reduce churn?
Improve onboarding, increase product usage through education content, build sticky features, collect and act on feedback, and communicate product updates regularly.
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