Definition · also called customer churn, revenue churn, MRR churn, attrition
Churn rate is the share of customers, or of recurring revenue, that you lose over a period. For subscription products it is usually measured monthly. 5% monthly churn means one in twenty customers who were paying at the start of the month cancelled during it.
There are two kinds, and they can tell different stories:
- Customer (logo) churn: the percentage of customers lost.
- Revenue (MRR) churn: the percentage of MRR lost to cancellations and downgrades. If your small customers leave and your big ones stay, revenue churn is lower than customer churn.
Churn rate formula
Customer churn rate = customers lost during the period ÷ customers at the start of the period
- Gross MRR churn = (churned MRR + contraction MRR) ÷ MRR at the start of the period.
- Net MRR churn = (churned + contraction − expansion MRR) ÷ starting MRR. It can go negative (see net revenue retention).
- Don't count customers who signed up during the month in the denominator, and don't count trial users who never paid.
- Monthly to annual: annual churn = 1 − (1 − monthly churn)^12. It compounds, so 3% monthly is about 31% a year, not 36%.
Worked example
You start March with 400 customers and $12,000 MRR. During March, 18 customers cancel (worth $450 MRR) and 6 downgrade (−$90 MRR). 25 existing customers upgrade (+$400 MRR).
- Customer churn = 18 ÷ 400 = 4.5%
- Gross MRR churn = ($450 + $90) ÷ $12,000 = 4.5%
- Net MRR churn = ($450 + $90 − $400) ÷ $12,000 = 1.2%
At 4.5% monthly customer churn you keep only (1 − 0.045)^12 ≈ 58% of a cohort after a year, which is why churn caps how big a product can get.
Monthly churn and what it means over a year
| Monthly churn | Customers left after 12 months | Average customer lifetime (1 ÷ churn) |
|---|---|---|
| 1% | 89% | 100 months |
| 2% | 78% | 50 months |
| 3% | 69% | 33 months |
| 5% | 54% | 20 months |
| 8% | 37% | 12.5 months |
| 10% | 28% | 10 months |
Calculated as (1 − monthly churn)^12 and 1 ÷ monthly churn. The lifetime column is what drives LTV.
The churn ceiling
Churn sets a ceiling on MRR. If you add the same number of customers every month, you plateau where new customers equal churned customers: ceiling = new customers per month ÷ monthly churn rate. Adding 50 customers a month at 5% churn tops out around 1,000 customers. To grow past that you need more acquisition, lower churn or more expansion revenue.
How small SaaS teams reduce churn
- Fix involuntary churn first. Failed cards are often a big share of churn and the cheapest to recover: retry schedules, card-updater, dunning emails and in-app reminders.
- Push annual plans. Annual customers churn at renewal, not every month; a discount for paying yearly buys a year of retention.
- Shorten time-to-value. Most cancellations happen early. Onboarding emails and a working template on day one beat any win-back campaign.
- Ask why on cancel. A one-question exit survey tells you whether churn is price, missing features or the customer's project ending.
- Pick customers who don't churn. B2B tools tied to revenue or uptime churn less than consumer and hobby tools.
Churn rate benchmarks
Churn varies hugely with price point and customer type, so compare yourself with businesses at a similar ARPA. ChartMogul's retention data is the most useful public reference for small SaaS because it is broken out by price:
| Benchmark | Value | Source |
|---|---|---|
| Top-quartile gross revenue retention, ARPA under $50/month | 60–70% per year (≈ 3–4% monthly revenue churn) | ChartMogul SaaS Retention Report (2023) |
| Top-quartile gross revenue retention, ARPA over $500/month | 90%+ per year (under ~1% monthly) | ChartMogul SaaS Retention Report (2023) |
| Businesses under $10 ARPA with gross retention above 85% | 5.3% | ChartMogul SaaS Retention Report (2023) |
| Best-in-class gross revenue retention, any stage | over 86% per year | ChartMogul SaaS Retention Report (2023) |
Monthly equivalents are our conversion of annual retention (1 − retention^(1/12)) and are approximate. Benchmarks you see quoted as “average SaaS churn is 3–5%” rarely say whether they mean monthly or annual, or customer or revenue churn; check before comparing. For low-priced consumer and prosumer tools, 5–8% monthly customer churn is common; B2B tools priced in the hundreds per month should aim for 1–2% or lower.
Churn rate in practice: how indie makers use it
Churn is the metric indie makers talk about least publicly and feel most. What it has looked like in the directory:
SiteGPT hit roughly $10K MRR in its first month, then lost about half its customers to churn before recovering and growing past that level. His lesson: expect churn after a launch spike. (source: superframeworks.com)
In 2018 Facebook suspended group posting through its API for six months, which cost Publer about half of its paying customers: platform-risk churn. An AppSumo partnership in 2020 helped revive growth. (source: publer.com)
Buffer's ARR bottomed at about $17.9M in January 2024 after a period where churn outpaced new revenue, then recovered to a new high of $22.4M by May 2025, shared in its public shareholder updates. (source: buffer.com)
Snappa slid from a peak of about $1.6M ARR to just under $1M, then began an AI-first rebuild, a long, slow churn story told in public. (source: indiehackers.com)
Keeps Inkdrop paid-only with no free tier so he can spend his limited solo time on paying customers, and has said revenue has stayed above $10K MRR for years. (source: indiehackers.com)
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Frequently asked questions
How do you calculate churn rate?
Divide the number of customers lost during a period by the number of customers at the start of that period. For revenue churn, divide churned and downgraded MRR by starting MRR.
What is a good churn rate for SaaS?
It depends on price point. B2B tools charging hundreds per month should aim for about 1% monthly revenue churn or less; low-priced consumer tools often see 5–8% monthly. ChartMogul's top-quartile companies under $50 ARPA keep 60–70% of revenue per year.
What is the difference between customer churn and revenue churn?
Customer churn counts lost accounts; revenue churn counts lost MRR. If small customers leave while large ones stay, revenue churn is lower than customer churn, and the reverse if big accounts leave.
How do I convert monthly churn to annual churn?
Annual churn = 1 − (1 − monthly churn)^12. For example, 3% monthly churn is about 31% annual churn, not 36%, because churn compounds.
What is negative churn?
Negative net churn means expansion revenue from existing customers (upgrades, seats, usage) is larger than revenue lost to cancellations and downgrades, so a cohort's revenue grows over time. It equals net revenue retention above 100%.
Related terms
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Maker examples are paraphrased from the cited sources and from each maker's IndieMakerList profile; revenue is self-reported unless marked verified. Spotted an error? Tell us.