Formula
How to Calculate Churn Rate
The percentage of customers or revenue lost over a given period, a critical indicator of product-market fit.
Customer Churn Rate
Churn Rate = Customers Lost in Period / Customers at Start of Period
Where
- Customers Lost
- = Number of customers who cancelled
- Starting Customers
- = Total customers at period start
What Is Churn Rate?
Churn rate measures the rate at which customers cancel their subscriptions or stop using a product. It's expressed as a percentage of customers (logo churn) or revenue (revenue churn) lost over a period. Net churn accounts for expansion revenue from existing customers. Negative net revenue churn (where expansion exceeds losses) is the gold standard and indicates strong product-market fit.
Worked Example
A SaaS company with 200 customers at the start of the quarter loses 10 customers (5% logo churn) but the departing customers were smaller accounts, so revenue churn is only 3%. Expansion from remaining customers creates -2% net revenue churn.
Why Churn Rate Matters
Churn is the silent killer of SaaS companies. High churn makes growth a treadmill — you have to replace lost revenue before you can grow. Understanding churn dynamics is essential for sustainable scaling.
Related Terms
Frequently Asked Questions
How do you calculate Churn Rate?
Churn Rate is calculated using the formula: Churn Rate = Customers Lost in Period / Customers at Start of Period. The percentage of customers or revenue lost over a given period, a critical indicator of product-market fit.
What is a good Churn Rate?
What constitutes a "good" Churn Rate depends on context — the fund's stage, vintage year, and strategy. Check our benchmarks and calculators for specific ranges.