Full Definition
Churn rate measures the percentage of customers (or revenue) that a company loses over a given period. It's one of the most critical metrics for subscription businesses because it directly impacts growth, profitability, and company valuation.
Types of Churn
- Customer Churn: Percentage of customers who cancel or don't renew
- Revenue Churn: Percentage of recurring revenue lost (accounts for different plan sizes)
- Net Revenue Churn: Revenue churn minus expansion revenue (can be negative, which is good)
Churn Benchmarks
- B2B SaaS: 3-7% annual churn is excellent
- SMB SaaS: 3-5% monthly churn is common
- Enterprise SaaS: <1% monthly churn is expected
- Consumer subscriptions: 5-10% monthly churn is typical
Real-World Example
A SaaS company with 1,000 customers loses 30 per month, giving a 3% monthly churn rate. They need to acquire 30+ new customers monthly just to maintain revenue.
Related Terms
Predictable, recurring revenue from subscriptions, measured monthly (MRR) or annually (ARR).
The total revenue a business can expect from a single customer throughout their entire relationship.
A metric measuring revenue retained from existing customers including expansion, contraction, and churn.
The stage where a product satisfies strong market demand, indicated by rapid organic growth.
The direct revenues and costs associated with a single unit of a business model (typically per customer).
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