Glossary
What is churn rate?
Churn is the rate at which customers stop paying or using a product over a period. Customer churn counts lost customers; revenue churn counts lost revenue, and can be offset by expansion from remaining customers. For subscription businesses, low churn is often more valuable than fast acquisition.
Calculating it
- Customer churn: customers lost in the month ÷ customers at the start of the month.
- Gross revenue churn: MRR lost from cancellations and downgrades ÷ MRR at start.
- Net revenue churn: (lost MRR minus expansion MRR) ÷ MRR at start. Negative means existing customers grow faster than you lose them.
What affects it
| Cause | Fix |
|---|---|
| Users never reach value | Better onboarding and activation |
| Wrong customers | Sharper ideal customer profile and listings |
| Payment failures | Dunning emails, card updaters |
| Missing features | Talk to churned users |
| Seasonal use | Annual plans, pause options |
Launch traffic and churn
Launch platforms and deal sites bring curious users who try many tools. Expect higher churn in those cohorts and judge channels by retained customers, not sign-ups.
Example
A SaaS sees 9% monthly churn. Exit surveys show most churned users never connected their data. A guided setup step cuts churn to 5% within two months.
FAQ
What is a good churn rate for SaaS?
It depends on segment; small-business SaaS commonly sees higher monthly churn than enterprise.
What is negative churn?
When expansion revenue from existing customers exceeds revenue lost to churn.
How do I reduce churn?
Improve activation, target the right customers and fix failed payments.