SaaS Churn Rate Calculator
What is SaaS Churn Rate?
In the Software as a Service (SaaS) industry, churn rate is the percentage of customers or revenue lost during a specific period. It is perhaps the most critical health metric for any subscription-based business. High churn indicates that customers aren't finding lasting value in your product, while low churn suggests strong product-market fit and customer satisfaction.
How to Calculate Customer Churn
The basic formula for Customer Churn is simple: divide the number of customers lost during a timeframe by the total number of customers you had at the beginning of that timeframe.
Formula: (Lost Customers / Starting Customers) x 100
Example: If you start January with 500 customers and lose 25 by January 31st, your monthly churn rate is (25 / 500) = 5%.
Revenue Churn vs. Customer Churn
While customer churn tracks the count of users, revenue churn (specifically Gross MRR Churn) tracks the impact on your bottom line. This is vital for SaaS companies with tiered pricing. If you lose one "Enterprise" customer paying $5,000/month, it impacts your business significantly more than losing one "Basic" customer paying $50/month, even though both count as "one" lost customer in customer churn metrics.
Benchmarks for SaaS Churn
What is a "good" churn rate? It depends on your target market:
- SMB (Small Business): 3% – 7% monthly churn is common as small businesses often go out of business or switch tools frequently.
- Mid-Market: 1% – 2% monthly churn is the target.
- Enterprise: Less than 1% monthly churn (or ~5-10% annually) is expected due to long-term contracts and high switching costs.
Customer Lifetime (LTV) Prediction
Churn rate is also used to calculate the average customer lifetime. By taking 1 and dividing it by your monthly churn rate, you can estimate how many months a typical customer stays with your service. For example, a 5% monthly churn rate implies a 20-month average customer lifespan (1 / 0.05 = 20).