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metrics

Churn Rate

Customer cancellation rate per period.

Churn Rate (attrition or cancellation rate) measures the percentage of customers who cancel their subscription over a given period. It's the opposite of retention and one of the most watched metrics by VCs. High churn indicates a problem with product-market fit or customer satisfaction.

Formula

Churn Rate = (Lost Customers / Customers at Period Start) × 100

Monthly churn is calculated by dividing customers who cancelled by customers at the start of the month, multiplied by 100 to get a percentage.

Concrete Example

A SaaS with 1,000 customers on January 1st and 30 cancellations in January.

Churn = (30 / 1,000) × 100 = 3%

Monthly churn is 3%.

SaaS Benchmarks

< 2%Excellent - Strong retention
2% - 5%Good - Acceptable
5% - 10%Average - Needs improvement
> 10%High - Critical problem

Tips

  • Analyze churn reasons via exit surveys
  • Good onboarding significantly reduces churn
  • Segment churn by cohort and plan
  • Negative churn (expansion > churn) is the ultimate goal

Common Mistakes

  • Confusing customer churn and revenue churn
  • Not differentiating voluntary and involuntary churn
  • Ignoring cohort effect in analysis

Related Terms

RETENTION RATELTVNRRPMF

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