Metrics & Performance
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
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.
In Practice
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 It 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 Concepts
Further Reading
What Founders Get Wrong About Valuation
A high valuation feels like winning. It's often a trap. Learn why the "right" valuation matters more than the highest one, and how vanity metrics can set you up for a painful down round.
Rolling Funds: The New Model for Venture Capital
How rolling funds work — the subscription-based venture capital model that lets managers raise continuously, LPs commit quarterly, and everyone skip the traditional 18-month fundraise.
How to Build a Financial Model for Your Startup
A step-by-step guide to building a startup financial model that impresses investors, drives decision-making, and helps you forecast growth, burn rate, and runway.
The VC Due Diligence Process: What to Expect
A founder's complete guide to the venture capital due diligence process — what investors examine, how long it takes, common red flags, and how to prepare your startup for scrutiny.
How to Write a Pitch Deck That Actually Gets Funded
Most pitch decks fail silently. Here's a slide-by-slide breakdown of what actually works when pitching VCs — based on what investors really look for.
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