Churn Rate
Churn rate is the percentage of customers or recurring revenue lost during a given period. Customer churn counts logos lost. Revenue churn counts dollars lost. They tell different stories, and confusing the two is one of the most common mistakes in SaaS reporting.
Annual Revenue Recovered
From churn intervention systems built at BatchService
Why Churn Rate Matters for SaaS Companies
Churn is the silent killer of SaaS growth. At 5% monthly churn, you lose nearly half your customer base every year. Every new customer you acquire just fills the hole left by the ones who left. For Seed to Series B companies, churn is the metric that separates companies that scale from companies that stall — because investors know that no amount of top-of-funnel growth fixes a retention problem.
Formula
Customer Churn Rate = (Customers Lost in Period / Customers at Start of Period) x 100
Benchmark
Best-in-class B2B SaaS: <2% monthly / <5% annual. Acceptable: 3-5% monthly. Red flag: >5% monthly.
Tools for Measurement
An Operator's Take
At BatchService, the board deck showed 3.2% monthly churn. Looked manageable. When I dug in, I found two problems. First, we were blending enterprise and SMB churn into one number — enterprise was 0.8%, SMB was 7.4%. The blended number hid the fact that our SMB product had a serious retention issue. Second, nearly 40% of the churn was involuntary — failed credit cards, expired payment methods, billing errors. That is not a product problem. That is a plumbing problem. We built automated dunning workflows and pre-expiration card update campaigns. Involuntary churn dropped by 62% in the first quarter. That single fix recovered $1.43M in annual revenue.
Common Mistakes
What I see go wrong at Seed to Series B companies.
Reporting a single blended churn number across all segments. Enterprise and SMB churn are different problems with different solutions. Always segment.
Confusing customer churn with revenue churn. If you lose 10 small accounts but retain your top 5, customer churn is high but revenue churn may be low. Both matter, but they require different responses.
Not separating voluntary from involuntary churn. Voluntary churn (active cancellation) is a product or value problem. Involuntary churn (failed payments) is an operations problem. The fixes are completely different.
Calculating monthly churn and multiplying by 12 to get annual churn. Monthly churn compounds. 5% monthly churn is actually 46% annual churn, not 60%.
Measuring churn only at the point of cancellation instead of tracking leading indicators like usage decline, support ticket patterns, and engagement drops.
What to Do This Week
Concrete steps you can take right now.
Pull your last 12 months of churn data. Segment by customer tier, plan type, and contract length. Find which segments are bleeding.
Tag every churned account as voluntary or involuntary. If involuntary churn is more than 20% of total, you have a billing infrastructure problem that is faster to fix than a product problem.
Calculate your churn rate using the Churn Calculator to see the annual revenue impact and model improvement scenarios.
For your top 10 churned accounts by revenue in the last 6 months, document when they started showing risk signals and when your team noticed. The gap between those two dates is your early-warning deficit.
Related Resources
Try These Tools
Further Reading
Frequently Asked Questions
What is a good churn rate for B2B SaaS?
For B2B SaaS, best-in-class companies achieve less than 2% monthly churn (under 5% annual). For Seed to Series B companies, 3-5% monthly is acceptable but should be actively improving. Above 5% monthly churn is a red flag that signals product-market fit issues, pricing misalignment, or operational gaps in billing and customer success.
What is the difference between customer churn and revenue churn?
Customer churn counts the percentage of accounts lost. Revenue churn counts the percentage of recurring revenue lost. They often tell different stories: you might lose many small accounts (high customer churn) while retaining large ones (low revenue churn). Revenue churn is generally more important for financial planning, but high customer churn signals underlying product or support issues.
How do you reduce SaaS churn?
Start by separating voluntary churn (cancellations) from involuntary churn (failed payments). Involuntary churn can be reduced quickly with automated dunning, pre-expiration card updates, and payment retry logic. Voluntary churn requires deeper work: usage-based health scoring, proactive outreach to at-risk accounts, onboarding improvements, and pricing alignment with value delivered.
Need Help With Churn & Retention?
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