What is a good churn rate for SaaS?

Below 5% monthly (or below 3% for established products). Annual churn below 10% is considered best-in-class for enterprise SaaS.

What is the difference between customer churn and revenue churn?

Customer churn counts lost customers regardless of plan size. Revenue churn measures lost MRR, weighted by what each customer paid.

Can churn rate be negative?

Net revenue churn can be negative when expansion revenue from existing customers exceeds lost revenue from churned customers. This is called negative churn.

What causes involuntary churn?

Failed credit card payments, expired cards, and insufficient funds. This is often recoverable through dunning emails and retry logic.

How often should I measure churn?

Monthly is standard for SaaS. Track both customer churn and revenue churn separately, as they tell different stories.

What Is Churn Rate? Customer & Revenue Churn Formulas for SaaS

Definition

Churn rate is the percentage of customers or recurring revenue lost during a specific time period. There are two distinct types: customer churn rate and revenue churn rate. Both are essential for understanding the health of a subscription business.

Customer Churn Rate Formula

Customer churn rate measures the percentage of customers who cancel during a period:

Customer Churn Rate = Churned Customers ÷ Start-of-Period Customers × 100

For example, if you start the month with 500 customers and 15 cancel, your customer churn rate is 15 ÷ 500 × 100 = 3.0%.

Revenue Churn Rate Formula

Revenue churn rate (also called MRR churn or gross revenue churn) measures the percentage of MRR lost to cancellations and downgrades:

Revenue Churn Rate = Lost MRR ÷ Start-of-Period MRR × 100

For example, if your starting MRR is $100,000 and you lose $4,000 to cancellations and downgrades, your revenue churn rate is $4,000 ÷ $100,000 × 100 = 4.0%.

Net Revenue Churn

Net revenue churn accounts for expansion revenue from existing customers (upgrades and add-ons) in addition to losses:

Net Revenue Churn = (Lost MRR - Expansion MRR) ÷ Start-of-Period MRR × 100

Net revenue churn can be negative. Negative net revenue churn means your existing customers are generating more expansion revenue than you are losing to churn. This is often called negative churn and is a hallmark of the best SaaS businesses. Companies with negative churn typically have net revenue retention above 100%.

SaaS Churn Rate Benchmarks

Monthly Customer Churn	Rating	Annual Equivalent
<2%	Excellent	<22% annually
2-5%	Acceptable	22-46% annually
5-7%	Concerning	46-58% annually
>7%	Critical	>58% annually

Enterprise SaaS typically sees less than 1% monthly customer churn due to longer contracts and higher switching costs. SMB-focused products often see 3-7% monthly churn because of lower commitment and smaller budgets.

To convert monthly churn to annual churn: Annual Churn = 1 - (1 - Monthly Churn Rate)^12. A 5% monthly churn compounds to approximately 46% annual churn.

Voluntary vs Involuntary Churn

Not all churn is the same. Understanding the cause determines the right response.

Type	Cause	Typical Fix
Voluntary churn	Customer actively cancels (dissatisfaction, budget cuts, competitor switch)	Improve onboarding, feature development, customer success outreach
Involuntary churn	Payment fails (expired card, insufficient funds, bank decline)	Dunning emails, smart retry logic, card updater services

Involuntary churn typically accounts for 20-40% of total churn in SaaS businesses. It is the easiest type to reduce because the customer did not intend to leave.

How Stripe Tracks Churn

Stripe provides several data points for measuring churn:

Subscription status changes. When a subscription moves from active to canceled, that customer has churned.
Cancellation timestamps. The canceled_at field records exactly when the subscription ended.
Invoice payment failures. Failed payments (invoice.payment_failed webhook) signal potential involuntary churn.
Subscription schedule changes. Downgrades can be detected by comparing the subscription price before and after a plan change.

StripeReport automatically tracks both customer churn and revenue churn from your Stripe data, separating voluntary and involuntary churn in your dashboard.