How to Calculate Churn Rate for SaaS: Formulas, Examples and Benchmarks

Churn rate for SaaS is calculated by dividing the customers or revenue you lost during a period by what you started with, then multiplying by 100. Three versions matter: customer churn, gross revenue churn, and net revenue churn, and each one answers a different question about how the business is really performing.

Key takeaways

• Customer churn counts lost accounts. Gross revenue churn counts lost MRR. Net revenue churn subtracts expansion MRR and can go negative.
• Recurly's July 2026 network data puts the SaaS median at 3.22% annual churn, with top-quartile companies at 1.78% or below.
• Paddle's ProfitWell Metrics, built on data from more than 30,000 SaaS companies, treats monthly churn under 1% as good and targets 106% net revenue retention.
• A 2025 KeyBanc Capital Markets private SaaS survey found median logo churn of 8-10% and revenue churn of 5-7% annually, with early-stage companies running higher still.
• ChartMogul's SaaS Retention Report found companies with NRR below 60% churn at roughly double the rate, about 7%, of companies at 100%+ NRR, about 3.5%.
• Cutting monthly churn in half roughly doubles customer lifetime value, which is why churn deserves as much attention as acquisition cost.

What is churn rate in SaaS?

Churn rate is the percentage of customers or recurring revenue a SaaS company loses over a set period, usually a month or a year. It is the mirror image of retention: if 95% of customers stick around, your churn rate is 5%. SaaS companies track it closely because churn caps how large the business can grow, no matter how much new revenue the sales team brings in each month.

Churn shows up in three separate metrics, and treating them as interchangeable is one of the most common mistakes teams make (more on that later). Customer churn tracks accounts. Gross revenue churn tracks lost MRR. Net revenue churn tracks lost MRR after accounting for what existing customers spent more on. A business can have flat customer churn and still be shrinking in revenue, or the reverse, so the three numbers need to be read together, not swapped for one another.

How do you calculate customer churn rate?

Customer churn rate equals the number of customers you lost during a period, divided by the number of customers you had at the start of that period, multiplied by 100. It is the simplest churn metric and the one most dashboards show by default.

Say a SaaS company begins the month with 800 paying customers and loses 20 of them by the end of the month. Customer churn rate is 20 divided by 800, times 100, which is 2.5%. Use the count from the first day of the period, not an average, and do not fold in customers you added during the same window, or the rate understates how many people actually left.

Some finance teams divide churned customers by the average of the opening and closing customer counts instead, which softens the number during a fast-growth month when a large batch of new signups would otherwise dilute the denominator. Either method is fine as long as you apply it consistently, so you are comparing the same calculation month over month. If you would rather skip the arithmetic, our free churn rate calculator runs all three formulas in this guide and checks your result against the benchmarks below.

How do you calculate revenue churn rate (gross and net)?

Gross revenue churn divides the MRR you lost to cancellations and downgrades by the MRR you started the period with. Net revenue churn subtracts any expansion MRR from that lost amount first, so it also accounts for upsells and add-ons. Net revenue churn is the more complete picture of whether your existing customer base is growing or shrinking in dollar terms.

Continue the same example. That SaaS company started the month with $200,000 in MRR. The 20 customers who left were worth $9,000 of that MRR, since churned accounts often skew larger or smaller than the average customer. Gross revenue churn is $9,000 divided by $200,000, times 100, which is 4.5%, nearly double the customer churn rate. Meanwhile, existing customers who stayed added $14,000 in expansion revenue that same month through upgrades and extra seats. Net revenue churn is ($9,000 minus $14,000) divided by $200,000, times 100, which comes out to negative 2.5%. The business lost accounts and lost some MRR to cancellations, but expansion from the customers who stayed more than covered it.

Customer churn vs gross revenue churn vs net revenue churn

Each metric can tell a different story about the same month, which is exactly why SaaS finance and growth teams track all three side by side instead of picking a favorite.

Annualizing any of these three rates takes one extra step most people get wrong. You cannot multiply a monthly rate by 12, because a customer who already churned in January cannot churn again in February. The correct formula is 1 minus (1 minus the monthly churn rate) raised to the 12th power. Applied to the 2.5% monthly customer churn rate from the earlier example, that works out to roughly 26% annualized (1 minus 0.975 to the 12th power), not the 30% a simple multiplication would suggest.

What is a good SaaS churn rate in 2026?

Recurly's July 2026 network data puts the SaaS median annual churn rate at 3.22%, with top-quartile companies holding churn at 1.78% or below, and frames 2% to 4% annual as the normal range for a well-run subscription business. Anything above roughly 5% annual is worth investigating.

The benchmark shifts a lot by segment. Enterprise SaaS with contracts above $100,000 ACV often runs under 1% monthly churn, close to Paddle's "good" threshold, while KeyBanc's 2025 survey found early-stage companies under $3 million ARR running 10-15% annual gross dollar churn and growth-stage companies at 5-8%. Self-serve, SMB-focused products tend to sit at the higher end of every range here, simply because smaller customers have less to lose by canceling and fewer internal champions keeping the subscription alive.

Churn and net revenue retention move together, which is why most SaaS boards review them in the same breath. ChartMogul's SaaS Retention Report found that companies with NRR below 60% carry a median churn rate near 7%, roughly double the approximately 3.5% median churn at companies holding 100% or higher NRR. Bessemer Venture Partners' widely used framing treats 100% NRR as "good," 110% as "better," and 120% or higher as "best," though that scale was built for growth-stage enterprise SaaS and runs optimistic for SMB-focused products. You can check where your own net revenue retention lands with our free net revenue retention calculator.

How does churn affect LTV and the LTV to CAC ratio?

Churn sits in the denominator of the standard LTV formula, so small changes in churn produce large changes in lifetime value. Cutting monthly churn in half roughly doubles LTV with no change to pricing or acquisition spend, which flows straight through to your LTV to CAC ratio.

Take a customer paying $300 a month at a 70% gross margin. At 3% monthly churn, LTV works out to ($300 × 0.70) ÷ 0.03, or $7,000. Bring churn down to 1.5%, through better onboarding or a customer success motion, and LTV doubles to $14,000 with the price and margin untouched. If CAC for that segment is $2,000, the ratio moves from 3.5:1 to 7:1. That is a healthy swing, but our customer acquisition cost vs LTV guide covers why a ratio pushing past 6:1 to 8:1 can also mean you are now underspending on growth rather than running efficiently, so the churn side and the acquisition side of the equation both need attention, not just one.

Common churn calculation mistakes

The formulas are simple, which is exactly why small mistakes slip in unnoticed.

• Treating logo churn and revenue churn as the same number. A stable customer count can hide a shrinking revenue base if your largest accounts are the ones leaving.
• Ignoring involuntary churn. Recurly's 2026 data puts involuntary churn, meaning failed payments and expired cards rather than active cancellations, at roughly a third of total SaaS churn. A dunning and card-retry process recovers real revenue that never shows up as a deliberate cancellation.
• Multiplying monthly churn by 12. This overstates annual churn because it ignores that a churned customer cannot churn twice. Use the compounding formula instead.
• Leaving downgrades out of revenue churn. A customer who steps down to a cheaper plan has not churned as an account, but the lost MRR still belongs in the gross revenue churn calculation.
• Counting non-paying trial users in the starting customer base. This inflates the denominator and makes churn look better than it is for paying customers.
• Comparing your number to the wrong benchmark. An SMB self-serve product benchmarked against enterprise SaaS churn will always look unhealthy, even when it is performing normally for its segment.

How to reduce churn once you know your number

Reducing churn is mostly a product and customer success problem, but content plays a supporting role most teams underuse. Clear onboarding guides and documentation help new users reach their first success faster, which is the exact mechanism our SaaS content marketing guide covers in more depth. A landing page that sets accurate expectations before signup also cuts early churn, because customers who arrive already knowing what they are buying stick around longer than customers sold on features the product does not actually have; see our breakdown of what makes a SaaS landing page convert without over-promising.

If your bigger challenge is lowering blended CAC so the acquisition side of the ratio improves too, not just the retention side, our B2B SaaS SEO service focuses on compounding organic channels instead of renting more paid traffic every month, which is often the faster lever once churn is already under control.

Frequently asked questions

How do you calculate churn rate for SaaS? Divide the customers you lost during a period by the customers you had at the start of that period, then multiply by 100. If you started the month with 800 customers and lost 20, churn rate is 20 divided by 800, times 100, which is 2.5%. Use the customer count from the very start of the period and leave out any customers you added during it.

What is a good churn rate for a SaaS company? Recurly's July 2026 network data puts the SaaS median annual churn rate at 3.22%, with top-quartile companies at 1.78% or below, and treats 2% to 4% annual as the normal range for a well-run subscription business. Enterprise SaaS with large contracts often runs under 1% monthly, while early-stage or SMB-focused products commonly see 2.5% to 3.5% or more.

What is the difference between customer churn and revenue churn? Customer churn counts how many accounts you lost, as a percentage of the accounts you started with. Revenue churn counts how much recurring revenue you lost to cancellations and downgrades, as a percentage of the MRR you started with. Losing a handful of your largest accounts can push revenue churn far above customer churn, so SaaS teams track both.

What is net revenue churn, and how is it different from gross revenue churn? Gross revenue churn only counts MRR lost to cancellations and downgrades. Net revenue churn subtracts any expansion MRR, such as upgrades and add-ons, from that lost amount before dividing by starting MRR. Net revenue churn can go negative, which means expansion revenue from existing customers outweighs what you lost to churn.

Can net revenue churn be negative, and is that a good sign? Yes, and it usually is. Negative net revenue churn means the recurring revenue you gain from existing customers upgrading or buying more exceeds the revenue you lose to cancellations and downgrades, so your revenue base grows even before counting a single new customer. It is one of the strongest signals of product-market fit a SaaS company can show.

How do you annualize a monthly churn rate? You cannot just multiply by 12, because a customer who churns in January cannot churn again in February. The standard formula is 1 minus (1 minus the monthly churn rate) raised to the 12th power. A steady 2.5% monthly churn rate compounds to roughly 26% annualized, not 30%.

How does churn affect the LTV to CAC ratio? Churn sits in the denominator of the standard LTV formula, so it has an outsized effect. Cutting monthly churn in half roughly doubles LTV with no change to pricing or acquisition spend, which directly improves the LTV to CAC ratio.

Should downgrades count as churn? Yes, for revenue churn. A customer who stays but downgrades to a cheaper plan has not churned as a customer, but the MRR they take with them counts as churned revenue in the gross revenue churn formula. Ignoring downgrades understates revenue churn even when your logo count looks stable.

What is the difference between voluntary and involuntary churn? Voluntary churn is a customer actively canceling. Involuntary churn is losing a customer to a failed payment, an expired card, or a billing error, with no cancellation decision involved. Recurly's 2026 data puts involuntary churn at roughly a third of total SaaS churn, so a solid dunning and retry process can recover real revenue without touching product or pricing.

What to do next

Pull your last full month of customer and MRR data, run it through the three formulas above, and compare the result to the 2026 benchmarks in this guide rather than a generic rule of thumb. If churn looks healthy but growth still feels expensive, the acquisition side of the equation is usually where to look next. Request a free SEO audit from Rankite and we will show you where organic growth can lower your blended CAC without adding more agencies or ad spend.