Churn is the rate at which customers cancel their subscriptions, known as customer churn, or the rate at which revenue is lost from cancellations and downgrades, known as revenue churn, in a given period. It is the inverse of retention and is one of the most important metrics for subscription businesses because it directly impacts growth, LTV, and company valuation.
Churn determines how much revenue you keep without doing any new sales work. High churn means you are constantly refilling a leaky bucket, and every dollar of new revenue has to first replace what walked out the door.
Investors treat churn as one of the clearest signals of product-market fit. A company can have strong new customer growth and still be a poor investment if churn is high enough to erode most of that growth every year.
Customer churn, also called logo churn, is the percentage of customers who cancel in a period. Revenue churn is the percentage of MRR lost to downgrades and cancellations before any expansion revenue is added back.
Gross revenue churn ignores expansion entirely and only measures what was lost. Net revenue churn nets expansion against losses, and when net revenue churn is negative, meaning expansion exceeds losses, that is expressed as net dollar retention above 100 percent.
You start the month with 1,000 customers and lose 25 of them. Logo churn equals 25 divided by 1,000, or 2.5 percent for the month.
You start the month with $100,000 in MRR and lose $8,000 to cancellations and downgrades. Gross revenue churn equals $8,000 divided by $100,000, or 8 percent for the month.
Monthly logo churn under 2 to 3 percent is typical for SMB SaaS, under 1 to 1.5 percent for mid-market, and often under 1 percent for enterprise, though enterprise sales cycles are also much slower to replace lost logos.
Annual gross dollar retention above 90 to 95 percent is considered healthy in B2B SaaS. Anything meaningfully lower is usually a signal of product-market fit or targeting problems rather than a one-off blip.
Counting upgrades or expansion revenue as negative churn instead of tracking it separately as its own line.
Ignoring involuntary churn, such as failed payments, which can be fixed with better billing retries and dunning emails rather than product changes.
Mixing cohorts of different ages together, which hides whether churn is improving or getting worse for customers acquired more recently.
On your traction slide, show a small table with gross dollar retention, net dollar retention, and monthly logo churn side by side, with the time window and cohort definition stated clearly underneath.
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