What is Churn Rate?

Churn rate is the share of customers, or of recurring revenue, that a company loses over a set period, calculated against what it had at the start of that period, and it’s the most direct measure of retention.

At a glance

• Customer churn rate = customers lost in the period ÷ customers at the start. This is also called logo churn.
• Revenue churn rate = recurring revenue lost to cancellations (and, in gross revenue churn, downgrades) ÷ recurring revenue at the start.
• Net revenue churn subtracts expansion from existing customers, so it can go below zero.
• Annual gross revenue churn is roughly 100% minus gross revenue retention. SaaS Capital’s 2025 survey of private B2B SaaS companies puts median GRR at 91%, which implies about 9% gross revenue churn a year.
• Always say which churn you mean, and over what period.

How to calculate churn rate

Pick the period and fix the starting group. Customers who sign up during the period don’t count in the denominator, and neither do their cancellations if they leave in the same period, or the number gets distorted by fast-growing months.

Example (illustrative): you start April with 200 customers and $400,000 of MRR. Six customers cancel, worth $18,000 of MRR, and two downgrade by $4,000. Customer churn is 6 ÷ 200, or 3%. Gross revenue churn is ($18,000 + $4,000) ÷ $400,000, or 5.5%. If other customers expanded by $10,000, net revenue churn is 3%.

The gap between customer churn and revenue churn tells you who’s leaving. Revenue churn higher than customer churn means you’re losing bigger accounts. Lower means the losses are mostly small ones.

Monthly and annual churn aren’t interchangeable

A monthly rate doesn’t multiply neatly into an annual one, because each month’s churn applies to a smaller base. A steady 2% a month means keeping 98% each month, which compounds to roughly 78% of customers kept after a year, or about 22% annual churn rather than 24%. Report the period you actually measured.

Common churn rate mistakes

• Mixing customer and revenue churn. They answer different questions, and the same quarter can look fine on one and bad on the other.
• Hiding churn in net numbers. Strong expansion can make net churn look healthy while cancellations climb.
• No reason codes. Without a recorded reason for each cancellation, there’s no way to tell a product gap from a bad-fit customer.
• Looking only at the total. Churn by cohort, segment and acquisition channel shows where the problem started, often in who was sold, not how they were served.

How churn rate shows up in a revenue system

Most churn is decided months before the cancellation: in fit at the sale, in onboarding and in how early someone notices an account going quiet. At AtoB, we run the customer-facing side alongside sales, covering support, collections, onboarding and QA. Read how the AtoB customer team runs.

Terms that sit next to churn rate

Revenue churn is built from churned MRR. A customer health score tries to predict it, and net revenue retention shows what’s left after expansion.