Definition
Churn is the percentage of customers, or of recurring revenue, that a business loses over a given period. Customer churn, also called logo churn, is customers lost divided by customers at the start of the period. Revenue churn is recurring revenue lost to cancellations and downgrades divided by revenue at the start. It is the leak in the bucket: however much water you pour in through sales, churn decides how much stays.
In a company, churn is tracked monthly and annually and split by segment, plan and cohort, because the average hides everything. Small business customers on monthly plans churn far more than enterprises on annual contracts. Churn is where product quality, onboarding, customer success and pricing all show up in a single number. Most churn is decided in the first weeks: customers who never reach value leave at renewal, so activation metrics are leading indicators of churn months later.
Benchmarks published for 2026 put median annual logo churn for B2B SaaS around 10%, with top-quartile companies under 5%. Enterprise-focused companies target under 5% a year, small business segments run 10 to 15% or more, and monthly churn of 3 to 5% is common in self-serve SMB products. The misconception is that churn is a customer success problem. It is a product and targeting problem first: the wrong customers, sold the wrong promise, churn no matter how good the support is.
In practice
A SaaS company with 1,000 customers loses 15 in a month: 1.5% monthly churn, which compounds to roughly 17% a year. Because every €1 of ARR lost must be replaced before the company grows at all, halving that churn was worth more than doubling the sales team.
Why it matters
Churn is the metric that decides whether growth compounds or evaporates. In the companies I run, we review churn by cohort every month, because a change in churn today shows up in ARR for years.
Frequently asked questions
- What is a good churn rate for SaaS?
- For B2B SaaS, annual logo churn around 10% is median and under 5% is top quartile. Enterprise companies with annual contracts should be under 5% a year; small business products often see 3 to 5% monthly. Revenue churn should be lower than logo churn, since the largest customers tend to stay.
- How do you calculate churn rate?
- Divide the number of customers lost during the period by the number of customers at the start of the period, then multiply by 100. For revenue churn, divide recurring revenue lost to cancellations and downgrades by recurring revenue at the start. Exclude new customers acquired during the period from the denominator.