How to Calculate Churn Rate for SaaS (Customer and Revenue Churn)
What Is Churn Rate?
Churn rate measures the percentage of customers or revenue lost over a given period. There are two distinct versions: customer (logo) churn and revenue churn. They measure different things and should be tracked separately.
Quick definitions:
- Customer churn rate — the percentage of customers who cancelled in a given period
- Revenue churn rate — the percentage of recurring revenue lost from cancellations and downgrades
Customer Churn Rate Formula
Customer Churn Rate = Customers Lost ÷ Customers at Start of Period
Example: You started the month with 200 customers and lost 6. Customer churn rate = 6 ÷ 200 = 3%.
Customer churn is useful for understanding pure logo retention — how many of your customers are staying. But it treats a $500/month customer and a $50,000/month customer as equal, which is why revenue churn is often more useful for SaaS businesses with variable contract sizes.
Revenue Churn Rate Formula
Revenue Churn Rate = (Churned MRR + Contraction MRR) ÷ MRR at Start of Period
Example: You started the month with $500K MRR, lost $15K to cancellations and $8K to downgrades. Revenue churn = ($15K + $8K) ÷ $500K = 4.6%.
Note that revenue churn includes both full cancellations and contraction (customers who reduced their contract value). This is important — a customer who drops from $60K to $20K has churned $40K of revenue even though they haven't fully cancelled.
Gross Revenue Retention vs. Revenue Churn Rate
Revenue churn rate and Gross Revenue Retention (GRR) are two ways of expressing the same thing. GRR = 1 − Revenue Churn Rate. A 4.6% monthly revenue churn rate corresponds to a monthly GRR of 95.4%.
GRR is typically the preferred format for board reporting and investor conversations because it's expressed as a positive retention percentage rather than a loss rate. Revenue churn rate is more intuitive for operational tracking. To round out your retention picture, you'll also want to track Net Dollar Retention, which adds expansion revenue back in.
Monthly vs. Annual Churn
Churn rates are almost always reported monthly. To convert monthly churn to an annual equivalent:
Annual Churn = 1 − (1 − Monthly Churn)^12
Example: 2% monthly churn = 1 − (0.98)^12 = 21.5% annual churn. This is why small improvements in monthly churn have outsized effects on annual retention — the compounding works in both directions.
Churn Rate Benchmarks for SaaS
What counts as good churn depends heavily on your market segment:
- SMB SaaS: 3–7% monthly customer churn is common. Annual revenue churn of 20–30% is typical.
- Mid-market SaaS: 1–2% monthly customer churn. Annual revenue churn of 10–15%.
- Enterprise SaaS: Under 1% monthly customer churn. Annual revenue churn under 10%.
Public SaaS companies with best-in-class retention (Veeva, Crowdstrike, Datadog) report annual gross revenue retention of 95%+ — which implies revenue churn rates well under 5% annually. For more on how the largest public SaaS companies compare, see our 2026 SaaS retention benchmarks.
The Most Common Churn Calculation Mistakes
- Using average customers as the denominator instead of beginning-of-period customers. This understates churn.
- Excluding contraction from revenue churn. A customer who downgrades has churned revenue even if they didn't cancel.
- Mixing monthly and annual contracts in the same churn calculation without normalizing to a common period.
- Counting reactivations as new customers rather than recovered churned customers, which artificially lowers gross churn.
Calculate Churn Automatically
ARRGuide calculates customer churn, revenue churn, GRR, and NRR automatically from your customer ARR data. Upload a CSV or connect Google Sheets and get your full ARR bridge with consistent churn methodology every month — no spreadsheet required.
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