Enter your starting customers and how many you lost to see churn.
How the churn formulas work
Customer churn rate = customers lost during the period / customers at the start of the period. If you started the month with 250 customers and 10 cancelled, that is 10 / 250 = 4 percent monthly churn, or 96 percent retention.
Revenue churn uses the same shape with money instead of heads: MRR lost to cancellations and downgrades divided by MRR at the start of the month. The two can tell very different stories. If your smallest customers churn but the big ones stay, customer churn looks scary while revenue churn stays calm. Track both.
Two derived numbers do most of the useful work. Annualized churn compounds the monthly rate (1 - (1 - monthly churn)^12), so 4 percent monthly is not 48 percent yearly, it is about 39 percent. And average customer lifetime is 1 divided by the monthly churn rate: at 4 percent monthly churn, an average customer stays about 25 months.
Why churn matters more than growth
Churn puts a hard ceiling on growth. If you lose 5 percent of customers every month, you must replace 5 percent just to stand still, and that treadmill speeds up as you grow. A business adding 20 customers a month with 3 percent churn eventually stalls at around 660 customers no matter how long it keeps running, because losses grow with size while acquisition stays flat.
Churn is also the input that makes lifetime value real. LTV divides your monthly gross profit per customer by churn, so halving churn doubles LTV, which doubles what you can afford to spend acquiring a customer. No other single metric moves the economics of a subscription business that much.
Benchmarks, honestly
Commonly cited ranges, with the usual caveat that price point and audience change everything: consumer and low-priced self-serve products often run 5 to 10 percent monthly customer churn. Small-business SaaS commonly sits around 3 to 7 percent monthly. Products selling to mid-market and enterprise are usually measured annually, where under 10 percent yearly revenue churn is considered good.
Early on, your churn number will be noisy because the denominator is small: losing 2 of 20 customers is 10 percent churn but might just be bad luck. Watch the trend over several months, and ask every churned customer one question: what did you switch to? The answers are usually worth more than the percentage.
Frequently asked questions
How do I calculate churn rate?
Divide the customers you lost during a period by the customers you had at the start of it. Losing 10 of 250 customers in a month is a 4 percent monthly churn rate. For revenue churn, divide the MRR lost to cancellations and downgrades by the MRR at the start of the period.
What is a good monthly churn rate for SaaS?
It depends heavily on price point and audience. Commonly cited ranges: 5 to 10 percent monthly for consumer products, 3 to 7 percent for small-business SaaS, and much lower for enterprise, which is usually measured annually. The trend matters more than any single month.
What is the difference between customer churn and revenue churn?
Customer churn counts people who left, revenue churn counts the money they took with them. They diverge when customers of different sizes leave: losing many small customers hits customer churn hardest, losing one big account hits revenue churn hardest. Tracking both shows which is really happening.
How does monthly churn convert to annual churn?
It compounds, so you cannot just multiply by 12. The formula is 1 - (1 - monthly churn)^12. For example, 4 percent monthly churn works out to roughly 39 percent of customers lost over a full year, not 48 percent.
How do I actually reduce churn?
Start by finding out where it concentrates: onboarding drop-off, a missing feature, or the wrong customers being acquired in the first place. Exit conversations with churned customers, even five of them, usually reveal one fixable cause. Retention work almost always beats spending more on acquisition.
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