Trying to pin down the average churn rate for SaaS is a fool's errand. The real answer is always, "it depends." Still, if you need a general rule of thumb, a healthy monthly churn rate often lands somewhere between 3-5%.
For a brand-new startup still finding its footing, that number might creep higher. But for a well-established company selling to large enterprises, anything over 1% would set off alarm bells. Think of churn as your company's pulse—it tells you how healthy your customer relationships really are.
Your Quick Answer to Average SaaS Churn Rates
There’s no magic number that applies to every SaaS business. Churn is deeply connected to who you sell to, your price point, and your company's age. So, instead of getting hung up on a single industry-wide average, it's much smarter to look at benchmarks for your specific market segment.
What's considered "good" is completely relative. An early-stage startup selling to small businesses might be okay with a 6% monthly churn while they iron out their product-market fit. An enterprise SaaS provider, on the other hand, would view a 1% monthly churn as a five-alarm fire. The goal is to measure yourself against the right yardstick.
Context Is Everything
Recent studies put the average monthly churn rate for SaaS companies at a slightly worrying 4.1%. Digging a little deeper, 3.0% of that is voluntary churn (customers choosing to cancel), and 1.1% is involuntary churn (from things like expired credit cards). For any team trying to protect its recurring revenue, that number should be a serious wake-up call. You can find more detail in these SaaS churn benchmarks to see how you stack up.
To give you a clearer picture, let's break down how churn rates typically look across different business models.
SaaS Monthly Churn Rate Benchmarks at a Glance
This table offers a quick snapshot of what to expect based on your target customer.
| Segment | Average Monthly Churn Rate |
|---|---|
| SMB & Startups | 3% - 7% |
| Mid-Market | 1% - 2% |
| Enterprise | <1% |
| B2C SaaS | 4% - 5% |
As you can see, it's a completely different ballgame depending on who you serve. Companies selling to small and medium-sized businesses (SMBs) will almost always have higher churn. Their customers are more price-sensitive, have fewer resources, and can switch to a competitor with much less hassle.
On the other end of the spectrum, enterprise clients are incredibly sticky. They’re usually locked into annual contracts, have deeply integrated your software into their workflows, and face massive costs if they decide to leave. This table gives you a much more realistic baseline for setting your own retention goals.
Understanding What Churn Really Measures
Before you can fix churn, you have to get clear on what the number is really telling you. Churn isn't just one metric; it’s a whole set of diagnostics for your company's health. Simply calling it "lost customers" is like a doctor saying a patient is just "sick"—it completely misses the nuances needed for a proper diagnosis.
Think of your business as a bucket you're constantly filling with new customers. Gross Churn is the raw measure of how many holes are in that bucket—it’s the total number of customers or the total revenue that leaks out, no questions asked.
But what if some of the customers still in the bucket started growing, adding more seats or upgrading their plans? That expansion revenue can help patch some of those holes. This is the concept behind Net Churn, which factors in that expansion revenue. It gives you a much clearer picture of your momentum.
The Why Behind the Goodbye
Once you start looking at the holes, you'll see they aren't all the same. There are two fundamental types of churn.
Voluntary churn is what most people think of: a customer consciously chooses to cancel. Maybe they found a better tool, their business needs changed, or they were just unhappy. This is the churn you fight with a better product, stronger onboarding, and killer customer support.
Then there's involuntary churn, the silent killer. This happens when a customer leaves by accident, almost always because a payment fails. An expired credit card, a bank rejection—these small technical glitches can boot a perfectly happy customer. Involuntary churn can easily make up 20-40% of total churn, and it’s often the easiest to fix. These are customers you can win back, often with a simple automated email.
Customers vs. Revenue: Which Loss Hurts More?
Finally, you have to ask yourself a critical question: did you lose a customer, or did you lose revenue? This is the crucial distinction between Logo Churn and Revenue Churn.
Logo Churn: This is the percentage of customer accounts (or "logos") you lost in a period. It treats every single customer the same, whether they're a solo founder paying $10/month or an enterprise giant paying $10,000/month.
Revenue Churn (MRR Churn): This measures the actual amount of monthly recurring revenue lost from those cancellations and downgrades. For most SaaS businesses, this is the number that truly matters for financial planning and health.
Losing one enterprise client can have a far greater impact on your bottom line than losing ten small businesses. That’s why tracking Revenue Churn is non-negotiable for understanding the true financial impact of customer attrition.
This isn't just an academic exercise. A low logo churn might look great in a board deck, but if the few customers who left were your biggest accounts, your business is actually in deep trouble. Getting a handle on these different views of churn is the first real step toward diagnosing what's wrong and building a strategy that actually works.
How to Calculate Your SaaS Churn Rate Accurately
Knowing what churn is in theory is great, but the real work starts when you apply it to your own numbers. Getting an accurate churn calculation is the essential first step to actually managing it. The good news? You don't need a Ph.D. in statistics to get a handle on your company's health.
We’re going to zero in on the two most important calculations for any SaaS business: customer churn and Monthly Recurring Revenue (MRR) churn. To make this real, let's walk through an example with a fictional SaaS company, "ConnectSphere," as they figure out their numbers for June.
Calculating Customer Churn
Customer churn, sometimes called logo churn, shows you the percentage of customers who bailed during a certain period. It’s the most direct measure of customer attrition and a pretty solid signal of whether you have good product-market fit.
The formula is refreshingly simple:
(Customers Lost in Period ÷ Total Customers at Start of Period) × 100
Let's watch ConnectSphere put this into action.
- Customers at the Start of June: ConnectSphere started the month with 500 active customers.
- Customers Lost in June: During the month, 20 customers decided to cancel.
- Calculation: (20 ÷ 500) × 100 = 4%
So, ConnectSphere’s customer churn rate for June was 4%. This number is a critical vital sign, but it has one major flaw: it treats every single customer as equal, which can be dangerously misleading.
Measuring only customer churn can hide a serious revenue leak. Losing a single high-value client can be more damaging than losing ten smaller ones, a reality that this metric alone won't capture.
Calculating MRR Churn
That brings us to the metric that really hits the balance sheet: MRR churn. This calculation tells you what percentage of your monthly recurring revenue vanished from existing customers. It paints a much clearer picture of the financial damage churn is causing.
Here is the basic formula for Gross MRR Churn:
(MRR Lost from Churned Customers ÷ Total MRR at Start of Period) × 100
Now, let's run the numbers for ConnectSphere again.
- MRR at the Start of June: The company kicked off the month with $50,000 in MRR.
- MRR Lost in June: Those 20 customers who left took $5,000 in MRR with them.
- Calculation: ($5,000 ÷ $50,000) × 100 = 10%
Whoa. ConnectSphere's MRR churn rate was 10%—more than double its customer churn rate. This tells a completely different, and more alarming, story. It's clear the customers who churned were, on average, paying a lot more than the ones who stayed.
For a deeper dive into these calculations and their nuances, you can learn more by calculating your churn rate with our comprehensive guide. With both of these metrics in hand, the team at ConnectSphere now understands not just how many customers are leaving, but the true financial impact of their departure.
SaaS Churn Benchmarks: What’s Good, What’s Bad, and What Actually Matters
Knowing your churn rate is a great start. But the real question is, how does it stack up? The truth is, the average churn rate for SaaS isn't a single magic number. It’s a huge spectrum that depends entirely on who you're selling to, what you're charging, and how your business is built.
Trying to compare your numbers to a blanket industry average is like comparing apples to oranges—it’s misleading and, frankly, unhelpful. To get a real sense of your company's health, you have to look at benchmarks within your specific segment.
Customer Size Is the Biggest Churn Driver
More than anything else, the size of the businesses you serve will dictate what a "normal" churn rate looks like. The dynamics between a small startup and a massive corporation are worlds apart, and their churn behavior reflects that.
SMB SaaS (3% - 7% monthly churn): If you sell to small and medium-sized businesses, you're going to see higher churn. It’s just the nature of the beast. SMBs are more sensitive to price, have tighter budgets, and can jump ship to a competitor without much fuss. A 5% monthly churn rate is pretty standard here.
Enterprise SaaS (<1% monthly churn): On the flip side, companies selling to large enterprises enjoy impressively low churn rates. We’re talking long-term annual contracts, deep integrations into their customers' daily operations, and massive costs associated with switching. Once you're in, you tend to stay in.
This image does a great job of showing the difference between losing a customer and losing the revenue they bring in.
As you can see, customer churn tells you how many left, but MRR churn tells you how much money walked out the door. For most SaaS businesses, the second one is what really keeps the CFO up at night.
Your Go-to-Market Model Matters, Too
How you get your product into customers' hands—whether you’re a B2B or B2C company—also shapes your retention profile. A B2C app with a low monthly fee will naturally see more casual sign-ups and cancellations than a B2B platform that requires a major organizational commitment.
A "good" churn rate is all about context. An enterprise SaaS company would be worried about a 1% monthly churn, while an SMB-focused startup might see a 5% monthly churn as a solid number they can work to improve.
The following table breaks down churn expectations across a few common SaaS categories, giving you a more granular view of what to expect.
Detailed Monthly Churn Rates by SaaS Category
| Category | Typical Monthly Churn Rate Range | Key Driver |
|---|---|---|
| B2C Streaming/Subscription | 5% - 10% | Low commitment, high competition, price sensitivity. |
| SMB Productivity Tools | 3% - 7% | High volume of small accounts, business failures, budget cuts. |
| Mid-Market CRM/ERP | 1% - 3% | Moderate switching costs, multi-year contracts, value-driven. |
| Enterprise Security/Infra | < 1% | Extremely high switching costs, deep integration, mission-critical. |
As the data shows, the more critical your tool is to a customer's core operations and the harder it is to replace, the stickier your product will be.
How Pricing and Revenue Fit In
Finally, there’s a strong link between your Average Revenue Per User (ARPU) and your churn rate. Generally, higher-priced products attract more committed customers. These are companies that have done their homework, secured a budget, and are invested in making it work. They don't churn lightly.
Across the B2B SaaS landscape, a healthy annual churn rate hovers around 4.91%. Most successful companies aim to keep their annual churn below 5%, which works out to a monthly target of roughly 0.4%.
But again, context is king. Those top-tier companies targeting SMBs are often fighting to keep monthly churn between 3-7%, while enterprise players are shielded by those ironclad contracts that push their monthly churn well below 1%.
Getting familiar with these nuances is the first step toward setting realistic goals for your own business. For a closer look at the data, you can explore our complete guide on SaaS churn rate benchmarks. It will help you move beyond generic numbers and start focusing on the metrics that actually matter for your corner of the SaaS world.
Using AI to Proactively Prevent Customer Churn
Knowing your churn rate is just the starting line. Actually reducing it is how you win the race. For too long, the standard playbook has been to send an exit survey after a customer has already canceled. That’s purely reactive. By the time you figure out why they left, their revenue is a ghost.
This is where AI-powered tools are completely flipping the script on retention.
Modern platforms like LowChurn help you get ahead of the problem. Instead of guessing which customers might be unhappy, these systems analyze real-time signals to predict churn before it even happens. It’s the difference between reviewing historical data and having a forward-looking strategy.
How Predictive AI Spots At-Risk Customers
So, how does it work? These systems plug directly into your business data sources, like a payment processor such as Stripe, and start digging into the subtle patterns of product usage. They can monitor thousands of data points that would be impossible for a human team to track.
Think of it as monitoring your customers' "digital body language." These signals can be very subtle:
- A user’s login frequency slowly drops off over a few weeks.
- They stop using key features that used to be central to their workflow.
- Their session times are getting shorter, pointing to waning engagement.
By connecting these behavioral changes with subscription data, the AI can flag customers who are silently drifting away. This gives your team a crucial 7-30 day heads-up to step in and re-engage them before they hit the cancel button.
This predictive power turns your customer success team into a precision-guided retention force. Instead of a one-size-fits-all approach, you can focus your valuable time and resources on the specific accounts that are truly at risk, making a much bigger impact.
For a busy SaaS team, this is a game-changer. You get a real-time customer health dashboard that doesn't just report on the past but actively shows you what to do next. It gives you a prioritized list of at-risk accounts, turning churn management from a guessing game into a data-driven workflow that directly saves MRR. To build on this, check out this actionable guide to reducing churn for more comprehensive strategies.
Turning Insights Into Action
Recent data gives us some cautious optimism. We’re seeing trends of improved net revenue retention as churn rates start to dip. From a promising -1.59% monthly churn for B2B SaaS in early 2024—a 12% improvement from the previous year—to a 4.1% average in 2025, the market is clearly adapting.
Ultimately, AI-driven tools give you the early warning system you need to act on these trends effectively. They arm you with the specific insights to launch targeted, high-impact retention campaigns. For founders and teams serious about protecting their growth, this proactive approach isn't a luxury anymore—it's an essential part of the modern SaaS playbook. If you’re ready to dive deeper, we have a whole guide on how to reduce customer churn with actionable strategies.
Got Questions About SaaS Churn? We've Got Answers.
Even after you've got the basics down, real-world questions about churn always pop up. This is where the rubber meets the road. We’ll skip the fluff and give you straight answers to the questions we hear most often from SaaS founders and product leaders.
What’s a Good Monthly Churn Rate for a New SaaS Startup?
If you're an early-stage SaaS company selling to small or medium-sized businesses (SMBs), a monthly churn rate between 3-5% is a realistic, if not ideal, starting point. Honestly, churn is just part of the game when you're still nailing down your product-market fit. Don't panic over the number itself; focus on the direction it's headed.
The most important thing is that the trend line is moving down. A "good" churn rate is one that's constantly improving. Your first major milestone should be getting that number below 3%. The best way to do that is to obsess over your user onboarding, drive early engagement, and make sure new customers feel the "aha!" moment as soon as possible.
How Do I Know if Churn Is a Product Problem or a Pricing Problem?
Figuring this out requires putting on your detective hat. You need to look at what customers did and what they said. Relying on just one won't give you the full picture.
Look at the Data: Dive into the product analytics of customers who canceled. Did they barely log in? Did they ignore the "sticky" features that your best customers love? If you see low engagement with your core value-driving features, you've likely got a product or onboarding problem. They just weren't getting the value they expected.
Just Ask Them: This is where exit surveys are golden. When someone cancels, trigger an automated email with a simple, one-click question: "What's the main reason you're leaving?" Give them clear options like "It's too expensive," "I wasn't getting enough value," or "I switched to a competitor."
If everyone is screaming "pricing," it’s time to take a hard look at your competitors. But if the feedback points to "value," your time is better spent improving the product experience, from onboarding to ongoing customer success.
Do Annual Plans Really Help Reduce Churn?
Yes, they absolutely do. It’s one of the oldest and most effective tricks in the SaaS playbook for a reason. Customers on annual plans churn at a dramatically lower rate than their monthly counterparts.
Think about it. The renewal decision is only on the table once a year, giving you 12 whole months to prove your worth and build a real relationship. Plus, the upfront payment creates a much stronger sense of commitment. They're literally more invested in your success.
A small discount, usually in the 10-20% range, is the standard way to encourage annual sign-ups. Not only does it lock in revenue and slash your churn rate, but it also gives your cash flow a serious, immediate boost. It’s a win-win.
How Can an AI Tool *Actually* Predict Who Is Going to Churn?
Modern AI platforms can spot the subtle warning signs of churn that a human team would easily miss. They work by analyzing thousands of tiny behavioral data points across your entire user base, looking for patterns that signal a customer is losing interest.
These tools are constantly tracking shifts in user behavior, such as:
- A gradual drop in how often a user logs in.
- Someone stops using a feature they once used every day.
- Session times are getting shorter and shorter.
- Fewer team members from an account are actively using the product.
This kind of behavioral data is the ultimate early-warning system. The AI learns the unique "digital body language" of a customer who's about to hit the cancel button and flags them for you. This gives your customer success team a critical window to step in with targeted help, a re-engagement campaign, or just a simple, human conversation to save the account.
Stop guessing which customers are about to leave. LowChurn uses AI to predict churn before it happens, giving you the insights to act decisively and protect your MRR. Get your early warning system today at LowChurn.