Churn
CHURN
The rate at which customers cancel or do not renew. Measured as logo churn (customers lost) or revenue churn (dollars lost).
Customers leave. They cancel their subscriptions. They do not renew. This is churn. There are two ways to measure it: logo churn (what percentage of customers did you lose?) and revenue churn (what percentage of ARR did you lose?). These numbers can be very different.
If you lost ten small customers worth $10k total but kept your five enterprise customers worth $500k, your logo churn is high but your revenue churn is low. Revenue churn is what the CFO watches. Logo churn tells you about customer satisfaction. Revenue churn tells you about financial health.
A healthy SaaS business has annual revenue churn under 10%. Great businesses get it under 5%. If you are losing 20% of your revenue every year, you are on a treadmill, running hard just to stay in place. Every improvement you make to the developer experience is an investment in retention. Retention compounds. The math is heavily in your favor.
Examples
A product with good retention.
You started the year with 500 customers. You lost 25. Your logo churn is 5%. But those 25 were small accounts totaling $50k out of $5M ARR. Revenue churn is 1%. That is excellent.
A company with a churn problem.
You are losing 20% of revenue annually. You have $10M ARR and need to replace $2M every year just to stay flat. You need $2M in net new ARR before you can grow. That is the treadmill.
Churn masking inside NDR.
Your NDR is 110%. Looks healthy. But gross retention is 75%. You are losing a quarter of customers and surviving on aggressive upsells to whoever stays. When expansion stalls, the churn problem becomes visible.
In practice
Read more on the blog
Frequently asked questions
What is an acceptable churn rate for SaaS?
Annual revenue churn under 10% is healthy. Under 5% is great. Monthly churn under 2% is the typical target. Enterprise products tend to have lower churn (longer contracts, higher switching costs) than self-serve products.
Related terms
The percentage of customers (logos) you lose in a period. Counts customers, not dollars.
The percentage of recurring revenue lost from cancellations and downgrades in a period. Measures the dollar impact of attrition.
The percentage of revenue retained from existing customers before counting expansion. Measures pure customer stickiness.
The percentage of revenue retained from existing customers after expansion, contraction, and churn. Above 100% means you grow without new sales.
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