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How to Calculate Your SaaS Startup's Customer Churn Rate

Updated: May 7

Because of its subscription-based pricing model, your SaaS business relies heavily on gaining and keeping customers to grow a recurring revenue stream. How do you know if you’re keeping your customers happy and if you're continuing to meet their needs?


Look at your customer churn rate.


Calculate customer churn rate (CCR) for your SaaS startup

What is customer churn rate?

The customer churn rate is the percentage of customers that cancel their subscriptions in a given time period. This important SaaS metric can help startups establish product-market fit.

How to Calculate Customer Churn Rate


The basic formula for SaaS customer churn is:


Customer Churn Rate = Number of existing customers who left during a given period ÷ ​Total customers at the start of that period


Example

If your company had 50 customers at the beginning of the month and during that month 12 customers left, you would have a monthly customer churn rate of 24%.


12 ÷ 50 = 0.24

Mathematically, this means churn is the inverse of customer retention in SaaS.


It’s worth noting that this ratio doesn’t account for the gross customer accounts at the end of the period, or the value you’re getting from each of the lost customers.


Ideally, a company’s customer churn rate would be well under 10%, but this figure can vary depending on industry competition and how mature your product or service is.



If your SaaS startup is seeing high customer churn, it’s important to try to understand why customers are leaving so you take appropriate action to stop the bleeding as quickly as possible.


It’s inevitable that some customers will leave, so there will be churn! Also don't neglect looking for the positives in your analysis, like trends that reveal strategies for sustainability.


 
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