What is churn rate?

Customer churn counts the percentage of customers who cancel; revenue churn counts the percentage of revenue lost from cancellations plus downgrades. The two often diverge: a business that loses many small accounts while keeping its large ones will have high customer churn but relatively low revenue churn.

Churn compounds in ways that are easy to underestimate. A 3% monthly churn rate is not 36% annually — it is closer to 30%, because each month you are churning from a slightly smaller base. Even 30% annual churn means replacing a third of your customer base every year just to stay flat. The businesses with the healthiest SaaS metrics typically run annual churn below 10%, and they get there by identifying at-risk customers before they cancel — not by trying to win them back after.