Churn Rate
The percentage of customers or revenue lost in a given period — the primary indicator of whether a product retains the value it delivers.
What is Churn Rate?
Churn rate measures the percentage of customers (or revenue) that stops using a product in a given period. It is the inverse of retention and the most direct signal of whether your product delivers lasting value.
Types of churn
| Type | Formula | What it measures |
|---|---|---|
| User churn | (Users lost ÷ Users at start) × 100 | % of users who stopped using the product |
| Revenue churn (MRR churn) | (MRR lost ÷ MRR at start) × 100 | % of recurring revenue lost |
| Net revenue churn | (MRR lost − expansion MRR) ÷ MRR at start | Churn net of upsells (can be negative) |
Benchmarks (B2B SaaS)
| Stage | Monthly churn benchmark |
|---|---|
| Early stage (< $1M ARR) | < 5% monthly |
| Growth stage ($1–10M ARR) | < 2% monthly |
| Scale stage (> $10M ARR) | < 1% monthly |
Annual churn = approximately (1 − (1 − monthly churn)^12) × 100
Root causes of churn
- Poor onboarding — users never reach activation
- Product doesn't solve the stated problem
- Better alternative exists (or customer perceives it does)
- Pricing misalignment — expected more for the cost
- Change in customer's internal priorities or budget
Free templates for Churn
Frequently asked questions
What's the difference between churn rate and retention rate?
They're complements: if monthly churn is 3%, monthly retention is 97%. Retention measures who stayed; churn measures who left. SaaS investors typically focus on retention cohorts (Day 30, Day 90 curves) rather than monthly churn because cohort curves reveal the depth of engagement.
What's negative net revenue churn?
Negative net revenue churn means your existing customers expanded (upgraded, added seats) more than the revenue lost from churned customers. It's a strong signal of PMF — your installed base is growing without new customer acquisition. Stripe and Datadog famously achieved this early.
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Related terms
Retention Rate
The percentage of users who continue using a product over a defined time period — the most important signal of product-market fit and sustainable growth.
LTV (Lifetime Value)
The total revenue a business expects to earn from a single customer over the entire duration of the relationship.
NPS (Net Promoter Score)
A customer loyalty metric based on a single question — 'How likely are you to recommend us?' — scored 0–10, that classifies respondents as Promoters, Passives, or Detractors.