SaaS Churn Rate Calculator
Analyze your customer retention and revenue leakage metrics.
Understanding SaaS Churn: The Ultimate Guide
In the world of Software as a Service (SaaS), growth isn't just about how many new customers you acquire; it's about how many you keep. Churn rate is the silent killer of subscription businesses, representing the percentage of customers or revenue lost during a specific timeframe.
What is Customer Churn Rate?
Customer churn rate is the most fundamental metric for subscription businesses. It measures the rate at which customers cancel their subscriptions. A high churn rate indicates that your product may not be meeting market needs or that your onboarding process is failing.
Churn Rate = (Lost Customers / Starting Customers) x 100
Customer Churn vs. Revenue Churn
While customer churn tracks people, Revenue Churn (MRR Churn) tracks dollars. This is crucial if you have multiple pricing tiers. For example, if you lose 5 customers on a $10/month plan but keep 1 customer on a $500/month plan, your customer churn looks bad, but your revenue churn might be manageable.
SaaS Churn Benchmarks
What is a "good" churn rate? It depends on your target market:
- SMB (Small Business): 3% – 7% monthly churn is common.
- Mid-Market: 1% – 2% monthly churn is standard.
- Enterprise: Usually measured annually, aiming for < 10% annual churn (less than 1% monthly).
Example Calculation
Imagine your SaaS started the month with 1,000 customers. During the month, 50 customers cancelled their accounts. Your monthly MRR was $20,000, and the cancellations resulted in $1,200 of lost revenue.
- Customer Churn: (50 / 1,000) = 5%
- Revenue Churn: ($1,200 / $20,000) = 6%
- Retention Rate: 100% – 5% = 95%
3 Ways to Reduce Churn
- Improve Onboarding: Ensure users reach their "Aha!" moment as quickly as possible.
- Proactive Support: Use product analytics to identify users who haven't logged in for a while and reach out.
- Exit Surveys: Always ask why a customer is leaving to identify patterns in product friction or pricing issues.