What is customer churn rate?
Customer churn rate, or logo churn, is the share of customers you lose over a period. A 3% monthly churn means 3 of every 100 customers cancel each month.
It is the clearest measure of whether customers stay. Logo churn counts customers; revenue churn counts dollars, and the two can differ when your larger accounts behave differently from your smaller ones.
The churn rate formula.
Churn rate = customers lost in the period divided by customers at the start, as a percentage. 3 lost out of 100 is a 3% churn rate, which means 97% retention.
Be explicit about the period. A 3% monthly churn is very different from a 3% annual churn.
A worked example.
You start the month with 100 customers and lose 3. Churn rate is 3 divided by 100, which is 3%. Retention is 97%.
What is a good churn rate?
It depends heavily on the period and segment. For B2B SaaS, healthy monthly logo churn is usually under 2 to 3%. On an annual basis, under 10 to 15% is healthy, and the best companies hold annual logo churn in the single digits. Small-business SaaS churns faster than enterprise, so judge against your own segment.
Logo churn understates the damage when you lose big accounts. Pair it with revenue retention to see the dollar impact.
How to reduce churn.
Churn is an onboarding, value, and fit problem more than a pricing one. Customers leave when they never reached value or were a poor fit to begin with.
Better-fit customers churn less, and acquisition channel shapes fit. Prospects who find you through organic search for a specific problem tend to retain better than discount-driven traffic. See how we attract better-fit customers through SEO.