Last updated: March 2025
Quick Answer
Churn rate is the percentage of your customers (or revenue) that leaves over a specific period. To calculate customer churn, divide the number of lost customers by your starting number of customers, then multiply by 100.
Key Takeaways
- ✓ There are distinct types of churn: Customer Churn (people leaving) and Revenue Churn (dollars leaving).
- ✓ Net Negative Churn is the Holy Grail: If the expansion revenue from your existing customers outpaces the revenue lost from canceling customers, your Net Revenue Churn becomes negative. This means your business will grow even if you add zero new customers.
- ✓ Retention beats Acquisition: Reducing churn by 5% can increase profitability by 25% to 95%.
The Difference Between Gross and Net Revenue Churn
Gross Revenue Churn only looks at the money you lost. It tells you exactly how much MRR (Monthly Recurring Revenue) leaked out of the bucket due to cancellations and downgrades.
Net Revenue Churn factors in the money you gained from your existing customer base (upsells, cross-sells, or pricing upgrades) before calculating what leaked out.
If you lose $2,000 in MRR to cancellations, but you successfully upsell your remaining customers a total of $3,000 in new MRR, your Net Revenue Churn is -1,000. It is a negative number, which is incredibly good for a software or subscription business.
Frequently Asked Questions
What is churn rate?
Churn rate is the percentage of customers or subscribers who cancel or fail to renew their subscriptions during a given time period.
What is a good churn rate?
It depends on your industry and target market. For SMB SaaS companies, a monthly churn rate of 3-5% is typical. For enterprise SaaS, acceptable churn might be under 1%.
What is the difference between customer churn and revenue churn?
Customer churn measures the percentage of people who leave. Revenue churn (or MRR churn) measures the percentage of revenue lost. If you lose one low-paying customer and one high-paying customer, your customer churn treats them equally, but revenue churn shows the true financial impact.