Churn Rate
The percentage of subscribers who cancel or don't renew their subscription within a given period, a critical metric for measuring customer retention and subscription health.
What is Churn Rate?
Churn rate is the percentage of customers who cancel their subscriptions or stop doing business with a company during a specific time period. For subscription businesses, churn rate is one of the most critical metrics because it directly impacts revenue, growth, and company valuation. Even small improvements in churn can dramatically affect long-term business outcomes.
Churn is typically measured monthly: Monthly Churn Rate = (Customers Lost During Month ÷ Customers at Start of Month) × 100. A 5% monthly churn rate means you lose 5% of customers each month. This compounds—5% monthly churn results in losing about 46% of customers over a year.
There are two types of churn: voluntary (customers choose to cancel) and involuntary (payment failures, expired cards). Voluntary churn is addressed through product improvements and customer success. Involuntary churn is addressed through dunning—automated payment recovery processes that can recover 20-50% of failed payments.
Industry benchmarks vary widely. Consumer subscriptions often see 5-7% monthly churn. B2B SaaS companies target under 5% annual churn for enterprise and 5-7% for SMB. Best-in-class subscription businesses achieve negative net revenue churn through expansion revenue, meaning the dollar value of their customer base grows even as some customers leave.
Key Churn Concepts
- Voluntary churn: Customers choose to cancel
- Involuntary churn: Payment failures (preventable with dunning)
- Monthly churn of 5% = ~46% annual customer loss
- B2B SaaS target: Under 5% annual churn
- B2C subscriptions: 5-7% monthly is common
- Reducing churn by 1% can increase revenue 10%+
Real-World Examples
See how churn rate impacts subscription businesses.
SaaS Calculation
A software company starts the month with 1,000 customers. 30 cancel. Monthly churn rate = 3%. Over a year, this means losing roughly 31% of the customer base.
Revenue Churn
€10,000 MRR at month start. €800 MRR canceled. Revenue churn = 8%. If expanding customers add €300, net revenue churn = 5%.
Involuntary Churn
40% of a company's churn is from failed payments. Implementing dunning recovers 60% of these, reducing total churn by 24% without changing the product.
Cohort Analysis
Customers acquired in January have 2% monthly churn. March cohort has 5%. This signals an onboarding or expectation issue with newer customers.
Negative Churn
A company loses €5,000 MRR to cancellations but gains €7,000 from existing customer upgrades. Net revenue churn is -2%—the holy grail.
Retention Impact
Reducing monthly churn from 5% to 4% increases customer lifetime from 20 months to 25 months—a 25% increase in lifetime value.
Reduce Churn with PayRequest
PayRequest helps you minimize both voluntary and involuntary churn through dunning automation, subscription flexibility, and customer self-service.
Automated Dunning
Recover failed payments automatically with smart retry logic and customer notifications. Reduce involuntary churn by up to 50%.
Flexible Subscriptions
Let customers pause, downgrade, or switch plans instead of canceling. A pause option alone can reduce churn by 10-15%.
Customer Portal
Self-service portal lets customers update payment methods before they fail. Proactive card updates prevent involuntary churn.
Churn Analytics
Track churn by cohort, plan, and reason. Understand what's causing customers to leave and take action.
Related PayRequest Features
Features that help reduce churn.
Related Glossary Terms
Reduce churn with PayRequest
Automated dunning, flexible billing, and self-service tools help you retain more customers and grow recurring revenue.