What is Churn Rate?
Churn Rate is The percentage of customers who stop using a product or cancel their subscription during a given time period.
Definition
Churn rate measures customer attrition. Calculate it by dividing the number of customers lost during a period by the number at the start of that period. A SaaS company with 1,000 customers that loses 30 in a month has 3% monthly churn. There's also revenue churn (sometimes called dollar churn), which measures the revenue lost from cancellations and downgrades. Revenue churn matters more than logo churn because losing a $50K account hurts more than losing five $1K accounts.
Why It Matters
Churn is the silent killer of SaaS businesses. You can grow 20% annually but still shrink if your churn outpaces acquisition. A 5% monthly churn rate means you're replacing more than half your customer base every year. That's a leaky bucket no amount of new logos can fill. RevOps teams track churn to identify at-risk accounts early and intervene before cancellation.
Example
A B2B SaaS company with $10M ARR and 8% annual gross revenue churn loses $800K in recurring revenue each year. Their expansion revenue (upsells, cross-sells) needs to exceed $800K just to break even before any net new customers.
Tools for Churn Rate
Find the Right Churn Rate Tool
Not sure which tool fits your needs? Check out our curated recommendations: