Churn rate is one of the most important metrics for subscription businesses because it directly impacts growth and profitability. Customer churn measures how many customers cancel, while revenue churn measures the dollar value lost. A healthy SaaS company typically targets less than 5% annual customer churn for enterprise and less than 7% monthly churn for SMB-focused products. High churn can indicate poor product-market fit, inadequate onboarding, or pricing issues. Reducing churn by even 1% can have a compounding positive effect on long-term revenue.
Churn Rate
Churn Rate - Churn rate measures the percentage of customers or revenue that a business loses during a specific time period.
What is Churn Rate?
Examples
- 1
If you start the month with 1,000 customers and 50 cancel, your monthly churn rate is 5%.
- 2
Revenue churn: starting MRR of $100K with $3K in cancellations gives a 3% revenue churn rate.
- 3
Net negative churn occurs when expansion revenue from existing customers exceeds lost revenue from churned customers.
Frequently Asked Questions about Churn Rate
Churn rate is the percentage of customers or revenue lost over a given time period, typically measured monthly or annually.
Churn rate is one of the most important metrics for subscription businesses because it directly impacts growth and profitability. Customer churn measures how many customers cancel, while revenue churn measures the dollar value lost.
If you start the month with 1,000 customers and 50 cancel, your monthly churn rate is 5%.
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