# Churn Rate

> The percentage of customers (or revenue) you lose in a period.

- Type: Glossary term — How fast customers leave you
- Tags: Metrics, Retention
- Growth levers: Retention (primary), also Revenue
- ~517 words

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Churn rate is the share of customers, or revenue, that you lose over a given period. It's the leak in your bucket, and the single fastest way to see whether growth is real or just papered over by acquisition.

> **Formula:** Churn rate = customers lost in the period ÷ customers at the start of the period × 100. For revenue churn, swap customers for MRR.

## How to calculate churn rate

Worked example: you start January with 1,000 paying customers and 30 of them cancel before the month ends. 30 ÷ 1,000 × 100 = **3% monthly churn**. Count only customers who were there at the start; new signups that cancel in the same month get handled in cohort views, not this headline number.

The trap is that monthly churn compounds. 3% a month sounds harmless, but 1 − 0.97¹² works out to losing about 31% of your base in a year. At 5% monthly you lose 46% a year. Small monthly leaks are big annual floods, which is why churn deserves a spot next to [MRR](https://www.productgrowth.blog/p/monthly-recurring-revenue-mrr) on the dashboard, not in a quarterly review.

## Customer churn vs revenue churn

Customer churn counts logos; revenue churn counts dollars. They diverge the moment your customers vary in size: lose ten $10/month hobbyists and you barely notice, lose one $10,000/month account and revenue churn screams while customer churn shrugs. B2B teams should treat revenue churn as the primary number.

Watch **net revenue churn** above all: gross revenue lost minus [expansion revenue](https://www.productgrowth.blog/p/expansion-revenue) from upgrades. If expansion from existing customers outweighs losses, net churn goes negative, the holy grail. Your revenue then grows even with zero new customers.

## What is a good churn rate?

Benchmarks depend on who you sell to. [Stripe's industry data](https://stripe.com/resources/more/what-is-an-average-churn-rate-here-is-how-to-figure-it-out?utm_source=productgrowth.blog) puts average SaaS churn at 4.67% monthly, and [HubSpot's guide](https://blog.hubspot.com/service/what-is-churn-rate?utm_source=productgrowth.blog) pegs small-business SaaS at 6 to 7% monthly while enterprise products target 1% or less. The pattern: the bigger the contract, the lower the acceptable churn.

| Segment | Monthly churn | Verdict |
| --- | --- | --- |
| Enterprise SaaS | ≤1% | The standard you're held to |
| Mid-market SaaS | 2-3% | Healthy |
| SaaS industry average | 4.67% | Survivable, not fundable |
| SMB / prosumer SaaS | 6-7% | Typical, fix before scaling spend |
| Any segment | >10% | Emergency. Stop acquiring, start retaining |

High churn quietly poisons every other metric: it shortens [customer lifetime value](https://www.productgrowth.blog/p/customer-lifetime-value-ltv), stretches your [CAC payback period](https://www.productgrowth.blog/p/cac-payback-period), and caps how big the business can ever get. Before spending another dollar on acquisition, check the inverse metric: [retention rate](https://www.productgrowth.blog/p/retention-rate).

#### What is a good monthly churn rate for SaaS?

Enterprise SaaS targets 1% or less per month, mid-market sits around 2 to 3%, and small-business SaaS averages 6 to 7%. The SaaS industry average is roughly 4.67% monthly. The larger the contract value, the lower the churn investors expect.

#### What is the difference between customer churn and revenue churn?

Customer churn is the percentage of accounts you lose; revenue churn is the percentage of recurring revenue you lose. They diverge when customers pay different amounts: losing one large account can dwarf losing many small ones. B2B businesses should track both but prioritise revenue churn.

#### How do you convert monthly churn to annual churn?

Annual churn = 1 − (1 − monthly churn)¹². You cannot just multiply by 12 because churn compounds on a shrinking base. A 3% monthly churn rate equals about 31% annually, and 5% monthly equals about 46% annually.

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