The rate at which customers cancel their subscriptions is a critical indicator of a software company’s performance. Calculating the SaaS churn rate helps company leaders and investors assess whether customers are willing to continue using the product.
What is SaaS Churn Rate?
SaaS churn rate is the percentage of customers or revenue a SaaS business loses over a given period. If customers cancel, downgrade, or stop paying, that’s churn. The churn rate indicates how quickly the loss occurs.
Most SaaS companies track churn monthly, though some measure it quarterly or annually, depending on contract length. The calculation stays the same: you compare what you lost during the period to what you had at the start.
Synonyms
- Average churn rate
- Monthly churn
- Annual churn
- MRR churn
- Customer attrition
- Annual customer churn rate
SaaS Customer Churn vs. SaaS Revenue Churn
In SaaS, there are two primary types of churn you’ll track: customer churn, which measures how many accounts you lose and revenue churn, which measures how much recurring revenue disappears.
SaaS customer churn
Customer churn tracks the percentage of customers who cancel during a given period. It answers a simple question: How many logos did you lose?
This metric treats every user equally. A $50/month account counts the same as a $50,000/month account. That makes it useful for spotting product adoption issues, onboarding gaps, and experience problems at scale.
High customer churn signals friction with the product or customer experience. Users don’t activate, don’t see value fast enough, or outgrow the product. If the number climbs, retention – not acquisition – is your problem.
SaaS revenue churn
Revenue churn measures how much recurring revenue you lose over a given period. It answers a different question: How much money walked out the door from those lost customers?
This metric accounts for customer size, downgrades, and contractions. Losing one large customer hurts more than losing ten small ones, and revenue churn captures that reality.
Revenue churn ties directly to pricing strategy, account mix, and expansion motion. If this number stays low or goes negative, your business compounds even when some customers leave.
Calculating SaaS Churn Rate
SaaS companies calculate their churn rates similar to other companies using the subscription business model: by dividing the number of customers who canceled their subscriptions in a given time period by the total number of customers at the start of that period.
The SaaS customer churn calculation is as follows:
For example, if a company had 10 customers in January and two canceled their subscriptions in February, the monthly churn rate for January to February would be 20%.
It’s important to note that this calculation does not consider new customers that joined during the period—only those who canceled.
Interpreting Your SaaS Churn Rate
According to Userpilot, the average churn rate in SaaS is about 5%. That number gets quoted a lot (we just did). But it also gets misunderstood.
A single churn benchmark only makes sense if your company looks like the average company in the dataset. Most don’t.
Why “5% churn” is arbitrary early on
If you’re an early-stage SaaS business, churn behaves differently. You’re still finding your ICP, your onboarding isn’t fully baked, and your pricing is somewhat experimental.
Higher customer churn at this stage doesn’t automatically mean you’ve failed. It often means learning. You’re testing assumptions in the real world.
If you’re a startup, what matters more than the absolute number is direction. Is churn stabilizing as you refine your product positioning, user onboarding, and use cases? Or is it drifting upward as you add more customers?
If churn drops cohort by cohort, you’re on the right track even if the headline number still looks “high.”
How interpretation changes as you scale
Once you reach product-market fit, churn expectations tighten. Mid-market and enterprise buyers expect reliability because contracts span multiple years and switching costs rise dramatically.
At that stage, flat or rising churn is a serious warning sign that usually points to value erosion, competitive pressure, and misaligned expansion into new segments. So for established SaaS companies, the metric becomes less about experimentation and more about execution.
Interpreting revenue churn requires additional nuance
Revenue churn works differently than customer churn; lower is better and net-negative is ideal. But context still matters. You can lose customers and still grow revenue if expansions and upgrades outweigh cancellations.
Positive revenue churn doesn’t always mean trouble if:
- Lost customers sit at the low end of your pricing tiers.
- Expansion revenue concentrates in your best-fit accounts.
- You’re intentionally moving upmarket.
On the other hand, low customer churn with high revenue churn is dangerous. That pattern means you’re retaining accounts while quietly losing value through downgrades.
What to look at alongside SaaS churn
Churn never tells the full story by itself. To interpret it correctly, look at it next to:
- Cohort retention to see if newer customers behave better than older ones
- Expansion and contraction rates to understand revenue durability
- Customer lifetime value (CLV) to measure long-term payoff
- Activation and time-to-value to spot early drop-off risk
SaaS Churn Rate Benchmarks
Although interpretation is nuanced, it’s still helpful to look at benchmarks for each SaaS industry so you know whether you’re on the right track as your SaaS reaches maturity. Below is benchmark data compiled from Recurly, as well as Paddle’s SaaS market reports for Q1 and Q2 of 2025.
SaaS Churn Rate Benchmarks (2026)
| SaaS segment | Average monthly churn rate | Average annual churn rate | Notes |
|---|---|---|---|
| B2B SaaS (overall) | 0.3% – 1% | 3.5% – 5% | Typical range across B2B SaaS. |
| SMB SaaS | 3% – 7% | 30% – 58% | Higher churn with price sensitivity and short contracts. |
| Enterprise SaaS | ≤1% | ≤10% | Enterprise deals stick better thanks to longer contracts. |
| Usage-based / freemium SaaS | 5% – 10%+ | 50%+ | Freemium and usage models tend to churn more. |
| B2C SaaS | 0.4% – 1% | 6% – 8% | B2C churn slightly higher annualized vs core B2B. |
| Voluntary (B2B) | 2.6% – 3.3% | N/A** | Customer-initiated cancellations. |
| Involuntary (B2B) | 0.8% – 1.1% | N/A** | Billing/payment issues. |
A few important notes:
- Long contracts and high switching costs allow enterprise SaaS vendors to retain customers far better than SMB and freemium models.
- SMB churn is high, often exceeding 30-50% annually, because they’re more price-sensitive and contracts are more flexible.
- B2C churn sits between traditional B2B and SMB churn, reflecting easier exit and lower switching costs.
KPIs Related to SaaS Churn Rate
To accurately evaluate company’s success using the SaaS churn rate, they need to break it down into five main subcategories: voluntary churn, involuntary churn, retention rate, average revenue per user (ARPU), and average revenue per churned subscription (ARPCS).
Voluntary Churn
When customers voluntarily churn, they’re actively choosing to stop using the service.
There are several reasons a customer would voluntarily leave:
- Dissatisfaction with the company or its products
- Unresolved customer service issues
- High subscription costs
- Lack of transparency in the billing process
- Finding a better alternative from a competitor
- Inability to correctly use the product
- Difficulty integrating the product with their workflow or tech stack
Retrospectively, companies often realize they could have reduced (or prevented) voluntary churn by addressing customer issues earlier in the process.
Involuntary Churn
Involuntary churn describes when customers cannot use the product or service anymore due to changes in their circumstances.
This typically occurs for one of the following reasons:
- Failed payments
- Account suspension due to fraud or misuse of services
- A customer forgets to renew their subscription
- Organizational changes or restructuring
- Changes in customer needs (or a lack thereof)
Involuntary churn accounts for between 20% and 40% of all customer churn. Organizations can prevent it by streamlining their subscription management processes to make sure customers don’t miss payments or fall behind on renewals.
Retention Rate
Customer retention describes a company’s ability to keep customers using a product or service for a longer period of time.
The customer retention rate is the percentage at which existing customers stay subscribed to a service.
Retention rate is calculated as follows:
For example, if a company had 10 customers in January and 8 were still using their service at the end of February, their monthly retention rate would be 80%.
When an organization increases its retention rate, it effectively decrease its churn rate (as long as the number of new customers remains constant).
Average Revenue Per User (ARPU)
Average revenue per user (ARPU) is the average amount of money a company receives from each user for its services.
The ARPU calculation is straightforward:
For example, if a company earns $1,000 in revenue and has 100 monthly active users, its ARPU would be $10.
ARPU helps companies define an acceptable churn rate. If a company expects greater revenue generation from each user, it will take a bigger hit every time a customer churns and should focus more heavily on retention.
Average Revenue Per Churned Subscription (ARPCS)
Average revenue per churned subscription (ARPCS) describes how much money a company loses when someone cancels their service.
The ARPCS calculation is as follows:
For example, if a company earns $1,000 in revenue from 10 customers who churned, its ARPCS would be $100.
Companies use ARPCS to understand the true cost of customer attrition and make more strategic decisions about their retention strategies.
Used together, ARPCS and ARPU help companies identify the most profitable point at which to keep customers subscribing.
Causes of High Saas Churn Rate
A high SaaS churn rate could be the result of numerous factors. Some of the most common causes include:
Poor Customer Experience and Support Service
The B2B customer experience is significantly different from that of direct-to-consumer brands.
Users who purchase software subscription services implement them companywide, meaning technology decisions affect hundreds or thousands of workers.
Specifically, elements of the customer experience that influence retention and churn rates are:
- Slow response times
- High wait times on hold
- Confusing user interfaces
- Poor or nonexistent onboarding processes
- Insufficient product education materials
When hundreds or thousands of employees can’t use a product correctly, the customer experience suffers.
And if they can’t get fast, personalized service, they’ll eventually cancel.
Payment Failures and Involuntary Churns
Payment failures and involuntary cancellations are two of the most common causes of SaaS churn rate.
On a macro level, they cost the economy almost $120 billion annually.
Sometimes, they aren’t preventable. For instance, a customer’s credit card may have expired, or the payment gateway might encounter technical difficulties. Still, there are several proactive measures you can take to avoid billing issues.
Pricing Model, Contracts, and Plans
Companies with complex pricing models have a harder time with retention because it confuses potential buyers. The same goes for companies that offer too many plans and pricing options if they aren’t a full-suite enterprise solution.
Shorter contracts also tend to yield higher churn rates, which is why it’s so common for SaaS businesses to offer a percentage discount or 1-2 months free for paying annually.
Low Perceived Value
While he worked at Moz, email marketing veteran Christoph Engelhardt reduced the company’s monthly churn rate by 40% by sending an email highlighting the value Moz provided to its customers during the first thirty days.
The reason it worked is simple: regardless of what a customer pays for the software products they need, they need to know they are getting their money’s worth to continue paying month after month.
Lack of Customer Engagement
Follow-up marketing messages and customer engagement initiatives should be part of any SaaS retention strategy.
If customers don’t feel connected to a service, they may not see the value in renewing or upgrading their subscription plans. Email marketing campaigns can help, as can personalization efforts like targeting discounts for specific customers or offering them special deals when their contracts are about
Impact of High SaaS Churn Rate
High SaaS churn rates make long-term survival difficult. Companies with high churn rates can’t build sustainable customer relationships, so they struggle to scale their products.
Loss in Revenue and Expansion Opportunities
When a company has to spend all its leftover resources on customer acquisition, it won’t have the expansion revenue needed to break into new markets, develop products that serve new customer segments, or hire more employees.
Less interest from investors
When revenue growth slows or stagnates, investors flee. Most of the time, founders with this problem end up accepting unfavorable (i.e., dilutive) investments to extend their cash runway, if they can attract anyone at all.
Negative Impact on Customer Retention Strategies
62% of customers say they share their bad experiences with others, according to Salesforce research.
An example of this is customer loyalty programs. They lose their efficacy if current customers no longer perceive a product’s value as the same.
How to Track Churn in a SaaS Business
If you’re tracking churn consistently, by type, and in context, it becomes your most critical metric for both overall business health and underlying drivers like product-market fit and user engagement.
Here’s how to do it properly:
1. Start with a fixed measurement cadence.
Most SaaS companies track churn monthly. If you mainly sell annual contracts, quarterly might make more sense, but monthly is generally best.
2. Lock in a clear definition of “churn.”
Customer churn usually includes cancellations, non-renewals, and accounts that fully downgrade to $0. Revenue churn includes lost recurring revenue from cancellations, as well as downgrades and contractions.
3. Track customer churn and revenue churn separately.
Customer churn tells you how many accounts you lose. Revenue churn tells you how much monthly or annual recurring revenue disappears. Always track both.
4. Use cohort-based tracking.
Topline churn hides trends, which is why you group customers by signup month, plan tier, use case, acquisition channel, or whatever’s most relevant to your business. If newer cohorts churn less than older ones, your product and positioning are improving.
5. Track churn alongside expansion and contraction metrics.
Look at gross churn (what you lose), expansion revenue (what existing customers add), and net revenue churn or net revenue retention (the combined effect). Negative revenue churn means expansion outweighs your losses.
6. Use your data sources correctly.
Most teams pull churn data from billing, CRM, usage analytics, and customer success tools. Product adoption platforms like Userpilot help connect usage behavior to churn outcomes, which is critical for diagnosing why customers leave, not just that they left.
7. Review churn as a trend, not a snapshot.
One bad month doesn’t mean you have a churn problem, but three bad months in a row do. Track and visualize churn trends over time, by segment, and by cohort so you can use it as a decision-making tool instead of a vanity metric.
Strategies to Reduce Customer Churn Rate in Saas Companies
There are several ways to SaaS customer churn. With process automation and a few changes to existing strategies, most organizations can make significant progress.
How to Reduce SaaS Churn
- Evaluate user behavior trends
- Centralize behavioral data
- Improve your product
- Optimize your pricing model
- Base pricing on customer data
- Incentivize longer-term commitments
- Use tiered pricing
- Scale pricing based on user count
- Offer proactive customer support
- Include self-serve support options
- Implement subscription management
- Use billing software
We explore some of these in detail below.
Utilize Data Analytics to Analyze Customer Behavior Trends
Data truly is king. In a 2023 survey from APMdigest, 70% of respondents indicated the use of a centralized data platform—83% of which reported significant money savings from doing so.
- Product development teams use customer data to identify usage patterns and make product improvements that better solve their pain points.
- Marketing and sales teams need it to communicate the product’s value to potential customers.
- Customer success teams use it to quickly resolve inquiries, standardize the process, and relay commonalities back to sales, marketing, and product development.
- Executives look at the bigger picture, using it to measure company health, make forecasts, and show progress to investors.
Depending on an organization’s exact structure, data comes from some or all of the following sources:
- The product itself
- CRM software
- Sentiment analysis and social listening tools
- Customer support calls and help desk software
- Marketing automation and email segmentation tools
- Billing software
Not all the data from these sources are connected to customer churn, but it can be used to build an overall picture of customer behavior that contributes to churn.
Optimize the Pricing Model with Competitive Prices and Discounts
Price optimization is a tricky equation.
Companies have to charge enough to make a profit. But overcharging drives customers away.
Different pricing strategies work for different organizations, but a few rules of thumb usually apply.
Base competitive pricing on customer data.
Comparing products’ features and value to similar products on the market is a good start.
But they won’t get a complete picture of the market unless they look at their customers’ perceived value of the product.
Through interviews, surveys, and A/B testing, they can determine the best way to bundle products and services at different price points.
Offer discounts for long-term contracts.
Annual recurring revenue (ARR) is the holy grail for SaaS companies.
Monthly contracts carry an inherent risk with them: They result in immediate cash flow, but they also enable customers to leave at any time.
It’s often worthwhile to offer discounts to customers who commit to an annual contract and stick with them.
For happy customers, longer-term contracts increase customer loyalty and help a company make better financial projections for the upcoming year.
Use tiered pricing to match a product’s price to its value per customer.
When customers have varied team sizes, they achieve different levels of value using a product.
Tiered pricing is an easy fix for complicated pricing models.
It allows companies to segment their customers and tailor their prices according to their needs.
The tiered approach is a win-win scenario: Customers get more value from the product while companies receive an increased revenue stream.
Scale pricing based on users or seats.
Since software licenses can span entire organizations, customers generally feel more comfortable paying for what they use.
This approach also helps companies retarget customers with offers to add new users or products as their organizations grow.
Enhance the Quality of Customer Support Services
76% of consumers say they would quit doing business after just one bad experience.
In B2B, it’s unlikely that one unsolved support issue would result in a companywide reevaluation of a vendor partnership.
But one bad experience can still damage relationships, and a failure to fix them results in churn down the line.
- The best way to avoid that is through proactive customer support. Investing in tech-enabled customer service solutions like help desk software and chatbot automation allows companies to communicate with customers more effectively, track their satisfaction over time, and provide quick resolutions for issues.
- Customers typically prefer self-service options when available. They offer the convenience of not having to wait for someone to help them solve their problem. Self-service portals give customers access to product documentation, tutorial videos, and FAQs without waiting for a rep.
Implement Subscription Management and Billing Solutions
Subscription management and automated billing save SaaS companies from dozens of issues that result in voluntary and involuntary churn.
The most essential benefits of subscription management and billing solutions include:
- Automating the payment process to ensure customer accounts are up-to-date
- Setting up flexible payment plans, including installment payments, pay-as-you-go contracts, and more
- Allowing customers to upgrade or downgrade their subscriptions with ease
- Accepting multiple payment methods so failed transactions don’t result in churn
- Automating billing notifications to reduce the time and cost of dunning management
- Dynamic discounting to offer personalized incentives
- Collecting customer payment data to show organizations which customers are most valuable
The result of these benefits is lower monthly and annual churn rates, especially given the large share that stems from billing and payment processing errors.
People Also Ask
What is the typical SaaS churn rate?
The typical SaaS churn rate depends on who you ask. Some sources say that it is as low as 5%, while others indicate it hovers around 10%. In truth, it varies from company to company, but should not exceed 10%.
Why is SaaS churn rate a key metric for subscription services?
SaaS churn rate is a key metric for subscription services because it lets companies measure customer loyalty and satisfaction, predict revenue, and make data-driven decisions that ultimately improve their products. It also helps them identify areas where they may be overspending or underperforming.