What is Churn Rate?
Customer Churn Rate
Churn Rate is the percentage of customers who cancel during a given period. Monthly churn of 3% = 36% annual churn.
Churn Rate = (Customers lost in period ÷ Customers at start of period) × 100SaaS SMB: 3-7% monthly · SaaS Mid-market: 1-2% · SaaS Enterprise: 0.5-1%
Why Churn Rate matters
Every point of churn compounds. 5% monthly churn caps your company at 20x MRR growth. 1% monthly churn allows 100x+ growth. Churn is the ceiling on your TAM.
Worked example
Plug a real number into the formula to see Churn Rate in action:
Numbers are illustrative. Try our Customer LTV Calculator for your real numbers.
Common mistakes with Churn Rate
- 1
Reporting MRR without separating new, expansion, contraction, churn. Net new MRR is the only number that matters for growth.
- 2
Counting trial signups as the conversion event. Activated trials (defined by an action) is the right gate.
- 3
Ignoring product-qualified leads. PQLs convert 3-5× higher than marketing-qualified leads.
How to improve Churn Rate
Move from MQL to PQL definitions. PQLs convert 3-5× better and reduce sales waste.
Build an activation metric tied to value realization (e.g. "X events in 7 days"). Drive trial users to that bar.
Use NRR as the north-star: 110%+ NRR means the business compounds without acquiring new customers.
Common questions about Churn Rate
What is Churn Rate?▾
How is Churn Rate calculated?▾
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Related terms
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