Calculate customer churn and retention rates for your business. Track how many customers you're losing and predict lifetime value impact.
Last updated: March 2026
Churn rate is the percentage of customers who stop doing business with you during a given time period. Also called attrition rate or customer defection rate, it's a critical metric for subscription businesses, SaaS companies, and any business with recurring revenue.
The formula is simple: divide the number of customers lost by the number of customers at the start of the period. A 5% monthly churn rate means you lose 5 out of every 100 customers each month. While that sounds small, it compounds—5% monthly churn equals approximately 46% annual churn due to the compounding effect.
High churn undermines growth. If you're acquiring 100 customers monthly but losing 50 to churn, you only net 50 new customers. This makes customer acquisition expensive and limits scalability. Reducing churn is often more cost-effective than acquiring new customers, as retaining existing customers typically costs 5-25x less than acquisition.
Note: Acceptable churn varies by industry, business model, and customer segment.
SaaS company tracking monthly churn:
It varies by industry and business model. B2B SaaS should target <5% monthly (<50% annual). B2C subscriptions often see higher churn (10-15% monthly). Enterprise contracts typically have much lower churn (1-2% monthly).
Track two metrics: customer churn (lost customers) and revenue churn (lost revenue). A downgrade isn't customer churn but is revenue churn. Both matter, but revenue churn often matters more to your bottom line.
Focus on: better onboarding (most churn happens early), proactive customer success, product improvements based on feedback, identifying at-risk customers early, improving support quality, and ensuring product-market fit.
Common causes: poor onboarding, lack of product-market fit, better competitor offerings, inadequate customer support, pricing issues, product bugs/reliability problems, or acquiring wrong customer segment.
Dramatically. Lower churn = higher customer lifetime value = better unit economics = higher valuation. SaaS companies with <3% monthly churn can command significantly higher multiples than those with 7%+ churn.
Gross churn only counts losses. Net churn subtracts expansion revenue (upgrades, upsells) from losses. You can have negative net churn if expansion revenue exceeds lost revenue—a very healthy sign.
Monthly for most subscription businesses. Track both customer count churn and revenue churn. Also segment by cohort (customers acquired in same month) to understand if churn is improving over time.
Severely. At 5% monthly churn, you must replace 5% of your base just to stay flat. To grow 10%, you must acquire 15% new customers. Lower churn makes growth exponentially easier.
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