What Is Churn Rate? Definition, Formula & Benchmarks

Churn rate measures the percentage of customers or revenue you lose over a given period. It is arguably the single most important metric for any subscription business because it directly determines how long customers stay, how much lifetime value they generate, and whether your growth efforts are sustainable.

There are two primary flavors of churn rate that every SaaS team should understand:

• Customer churn rate (logo churn) — the percentage of customers who cancel during a period, regardless of how much they were paying.
• Revenue churn rate — the percentage of recurring revenue lost during a period, which weights high-value accounts more heavily.

Logo churn treats every customer equally: losing a $10/month account counts the same as losing a $10,000/month account. Revenue churn, on the other hand, reflects the financial impact. A company can have low logo churn but high revenue churn if its largest customers are leaving, or vice versa. Tracking both gives you the complete picture.

The standard customer churn rate formula is straightforward:

For example, if you begin the month with 500 customers and 15 cancel, your monthly churn rate is:

Revenue churn works similarly but uses MRR instead of customer count:

Some teams calculate net revenue churn, which subtracts expansion revenue from the numerator. If your expansion revenue exceeds churned revenue, you achieve negative net churn — meaning your existing customer base is growing even without new sign-ups.

Monthly and annual churn rates are not interchangeable by simply multiplying by 12. A 5% monthly churn rate does not equal 60% annual churn — it compounds. The correct conversion formula is:

Using this formula, a 5% monthly churn rate actually translates to roughly 46% annual churn — meaning you would lose nearly half your customer base in a year. Conversely, a seemingly small 2% monthly churn compounds to about 21.5% annual churn.

To convert the other direction, from annual to monthly:

Always be explicit about which timeframe you are using when discussing churn internally or with investors. Mixing monthly and annual figures in the same conversation is a common source of confusion.

Churn benchmarks vary significantly depending on your market segment, price point, and contract structure. Here are widely cited ranges:

• B2B SaaS (SMB): Monthly churn of 3–7% is common. Annual churn of 30–50% is not unusual for self-serve, low-ACV products.
• B2B SaaS (Mid-market & Enterprise): Annual logo churn of 5–7% is considered good. Best-in-class companies achieve under 5% annual churn, according to data from SaaS Capital and KeyBanc Capital Markets surveys.
• B2C SaaS / Consumer Subscriptions: Monthly churn of 5–10% is typical. Consumer products generally see higher churn because switching costs are lower and purchasing decisions are more impulsive.

As a rule of thumb: if your monthly customer churn is below 2%, you are performing well. Between 2–5% is typical for many SaaS businesses. Above 5% monthly signals a serious retention problem that will make profitable growth extremely difficult.

Keep in mind that benchmarks for revenue churn tend to be more favorable than logo churn, because companies usually lose smaller customers at higher rates while retaining larger accounts.

Both metrics serve different purposes, and the right one to focus on depends on your business model and current priorities.

Logo churn is the better metric when:

• Your pricing is relatively flat (most customers pay similar amounts).
• You want to understand product-market fit across your entire base.
• You are in the early stages and every customer counts for social proof and feedback.

Revenue churn is the better metric when:

• You have a wide range of contract values and losing a single enterprise account can materially impact your business.
• You want to understand the financial health of your customer base.
• You are building a case for investors, who care most about revenue trajectory.

In practice, mature SaaS companies track both metrics side by side. A divergence between the two often reveals important insights — for instance, if logo churn is rising but revenue churn is flat, your smallest customers may be dissatisfied while your core market remains healthy.