Retention metric
Churn rate (customer + revenue churn)
Churn rate measures how fast customers leave. There are four related metrics: gross customer churn (raw cancellation rate), net customer churn (cancellations minus reactivations), gross revenue churn (revenue lost from cancellations), and net revenue churn (revenue churn offset by expansions). Each tells a different story.
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Formula
Gross customer churn = customers lost in period / customers at start of period. Net revenue churn = (gross churn revenue - expansion revenue) / starting MRR.
Where:
- customers lost = Customers whose subscription ended in the period.
- customers at start = Active paying customers at the start of the period.
- expansion revenue = Upgrades, additional seats, or plan changes that increased MRR from existing customers.
Worked example
Start of month: 100 customers, $4,221 MRR. End of month: 95 customers (5 churned, 0 new), $4,400 MRR (5 customers upgraded from $29 to $99). Gross customer churn = 5 / 100 = 5%. Gross revenue churn = (5 × $29) / $4,221 = 3.4%. Net revenue churn = (3.4% revenue churn - $350 expansion) / $4,221 = negative, meaning the business grew despite churn.
What it tells you
- The retention engine's health. Low churn compounds revenue; high churn caps growth no matter how good acquisition is.
- Whether expansion is offsetting churn. Net revenue churn under zero means existing customers grow faster than they leave.
- Customer-fit signal. Sudden churn spikes often signal a wrong-cohort acquisition push or an offer-fit issue.
What it does NOT tell you
- Why customers leave. Churn rate is a signal; exit surveys tell you the reason.
- Which cohorts are churning. Aggregate churn can mask wildly different cohort-level rates.
- When churn will stabilize. Early-stage SaaS often shows declining churn rate as the product matures.
Common miscalculations
- Using churn rate from one month as if it were stable. Single-month rates are noisy; use 3-6 month averages.
- Confusing gross and net churn. Net churn can be negative (a good thing) while gross churn is high.
- Counting downgrades as 'half a churn'. Downgrades belong in revenue churn, not customer churn.
What is a good Churn?
See the directional range on the SaaS churn rate benchmark page →
Frequently asked
- What is a 'good' indie SaaS churn rate?
- See the matching benchmark page for directional ranges. Generally: under 5% monthly is healthy at $20-$50/mo price points; under 2% is healthy at $100+/mo; over 10% is a fit problem, not a tactics problem.
More retention metrics
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