Churn Rate

There are two primary types of churn that SaaS companies must track independently. Customer churn (also called logo churn) counts the number of accounts that cancel regardless of their size. Revenue churn (also called MRR churn) measures the actual dollar impact of cancellations and downgrades. A company might have low customer churn but high revenue churn if its largest accounts are leaving, or vice versa. Both metrics tell different stories and require different interventions. The compounding effect of churn is often underestimated. A monthly churn rate of just 5% means you lose roughly 46% of your customer base over a year. This means nearly half of your acquisition efforts are spent simply replacing lost customers rather than growing the business. Best-in-class SaaS companies aim for monthly churn rates below 2% for SMB products and below 0.5% for enterprise products. Reducing churn requires investment in product quality, onboarding experiences, customer success programs, and ensuring strong product-market fit with your ideal customer profile.

A CRM SaaS starts the month with 1,000 customers and loses 30 by month-end. Their monthly customer churn rate is 3%. Those 30 customers were paying an average of $200/month, meaning they also lost $6,000 in MRR. If the total starting MRR was $250,000, the monthly revenue churn rate is 2.4%. The difference between the two rates reveals that smaller accounts are churning more frequently.