Churn Rate
Churn rate is the percentage of users or customers who stop using your product in a given period.
What it means
Churn is the bad twin of retention. If 100 paying customers start the month and 5 cancel, your monthly churn is 5%. Sounds small, but compounded over a year it means you'd lose 46% of your customer base if you didn't acquire any new ones.
There are two main flavors: customer churn (people leaving) and revenue churn (money walking out the door). They can differ if your churned customers were on different plans. Most teams track monthly churn for SaaS and weekly cohort churn for consumer apps.
Low churn is the secret weapon of compounding businesses. A SaaS with 1% monthly churn keeps almost all customers each year. A SaaS with 10% monthly churn loses most of them. The difference between 1% and 10% churn is the difference between a fast-growing company and a treadmill.
Why it matters
Churn determines whether you're running a business or filling a leaky bucket. Lower churn means higher LTV, longer customer relationships, and more compounding revenue. It's harder to win against high churn than to grow with low churn.
How to calculate churn rate
Churn Rate = (Customers Lost / Customers at Start) × 100
Divide the number of customers lost in a period by the number who started the period.
Example with real numbers
Concrete example showing how this metric works in practice.
Scenario
You started the month with 200 paying customers. By end of month, 12 had cancelled.
Calculation
(12 / 200) × 100 = 6%
What it means
Your monthly churn is 6%. Annualized, that's 52% (using monthly compound). Worth investigating: are the cancelled customers from a specific cohort, plan, or acquisition channel?
What's a good number?
Typical benchmarks. Always compare against your own historical data first, industry averages second.
Above 10% monthly
5% to 10% monthly
2% to 5% monthly
Below 2% monthly
These are SaaS benchmarks for B2C products. B2B SaaS typically sees lower churn (under 1% monthly is great). Annual contracts typically see lower churn than monthly. Compare against similar businesses, not industry averages.
Common mistakes
Things people get wrong when measuring churn rate.
Mistake 01
Calculating churn at quarter or year level. Monthly churn is more actionable and easier to interpret.
Mistake 02
Mixing voluntary churn (cancellations) with involuntary churn (failed payments). Different problems with different fixes.
Mistake 03
Looking at churn rate alone without revenue churn. Losing 5 free users matters less than losing 5 enterprise accounts.
Mistake 04
Only measuring churn after the trial. Trial-to-paid conversion is a different metric and often the bigger leak.
How to track it
Count customers at the start of each month and how many cancel during that month. Track customer churn (count) and revenue churn (dollars) separately. Watch for trends over 3 to 6 months, not single-month spikes.
Free tools to help
Muro built free calculators and analyzers around this metric.
Related concepts
Other terms worth learning if you're studying this one.
Common questions about churn rate
For B2C SaaS, under 5% monthly is good and under 2% is great. For B2B SaaS, under 1% monthly is the target. The most useful comparison is your own churn over time.
Divide the number of customers who left during a period by the number you had at the start. If you started the month with 100 and 5 left, your monthly churn is 5%.
They're inverses. If 100 customers start the month and 95 stay, your retention is 95% and your churn is 5%. Same data, different framing.
Find why customers leave: exit surveys, talking to recently churned users. Common causes: lack of activation, missing features, sticker shock at billing, or simply forgot to cancel a free trial. Each has a different fix.