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Churn Rate

Metric
Foundation

Definition

The percentage of customers or revenue you lose over a specific period.

Related Knowledge

Retention

Core formulas

Customer churn rate=Customers lost during periodCustomers at start of period×100\text{Customer churn rate} = \frac{\text{Customers lost during period}}{\text{Customers at start of period}} \times 100
Gross revenue churn=Revenue lost from cancellations + downgradesTotal revenue at start of period×100\text{Gross revenue churn} = \frac{\text{Revenue lost from cancellations + downgrades}}{\text{Total revenue at start of period}} \times 100

Types of churn

  • Customer churn – percentage of customers lost
    • Answers: Is the product sticky? Are users satisfied?
  • Revenue churn – percentage of recurring revenue lost
    • Answers: Is the business financially healthy?
    • Often more important than customer churn because not all customers are worth the same amount.
    • Especially relevant for SaaS with varying contract sizes.
  • Net revenue churn – includes expansion revenue from existing customers
    • Can be negative when upsells and cross‑sells from existing customers more than offset losses from churn.

    • The disconnect: customer vs revenue churn

    Ideally, customer churn and revenue churn should be roughly aligned. When they diverge, it tells you who is churning.

  • Revenue churn > customer churn
    • Bad. You are losing high‑value customers ("whales") while keeping lower‑value ones ("minnows").
  • Customer churn > revenue churn
    • Better. You are losing more customers in count, but mainly small, low‑value accounts.
    • Your big, profitable clients are staying.

    • Negative churn

    Negative churn happens when expansion revenue (upsells and cross‑sells) from remaining customers is higher than the revenue lost from churning customers.

  • Even if some customers leave, total recurring revenue grows.
  • This is a hallmark of very strong SaaS and subscription businesses.

    • Benchmarks (monthly churn)

  • B2C (for example, Spotify, Netflix):
    • Churn is naturally higher.
    • 3%–5% monthly churn is common.
  • SMB B2B (for example, Mailchimp):
    • 1%–2.5% monthly churn is generally acceptable.
  • Enterprise B2B (for example, Salesforce):
    • Selling to very large companies.
    • < 1% monthly churn is expected.