How to Calculate Churn Rate for SaaS

Customer churn vs revenue churn

Customer churn counts people who left: divide customers lost in a period by customers you had at the start of it. Revenue churn counts the money they took with them: divide MRR lost to cancellations and downgrades by MRR at the start of the period.

The two can tell different stories. If your smallest customers churn but your biggest accounts stay, customer churn looks alarming while revenue churn stays calm. If one large account leaves, the reverse happens. Track both, and pay attention when they disagree, that disagreement is information.

Why monthly and annual churn are not the same math

Churn compounds, so you cannot multiply a monthly rate by 12 to get an annual one. The correct conversion is 1 minus (1 minus monthly churn) to the twelfth power. At 4 percent monthly churn, that works out to roughly 39 percent of customers lost over a year, not 48 percent.

What counts as a good churn rate

• 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
• Mid-market and enterprise products are usually measured annually, where under 10 percent yearly revenue churn is considered good

Treat these as rough reference points, not targets. Price point, contract length, and how sticky the workflow is all move the honest benchmark more than any single published number.