At a Glance
The churn rate (attrition rate/cancellation rate) measures the percentage of customers who end their business relationship within a specific period. It is the most important countermetric to the retention rate and has a direct impact on customer lifetime value. For subscription business models, the churn rate is existential: even a reduction of a few percentage points can massively increase company value. Customer success is the most effective strategy for churn reduction.
1. Definition: What Is Churn Rate?
The churn rate (also attrition rate, cancellation rate, or turnover rate) indicates what proportion of customers end their business relationship within a defined period. It is the direct counterpart to the retention rate: Retention Rate + Churn Rate = 100%.
In subscription models, churn is the silent killer of growth: if 5% of customers cancel each month, a company must acquire 5% new customers every month just to maintain the status quo—before any growth is even possible. The acquisition costs (CAC) for this erode margins.
That is why churn reduction is often the most effective growth lever: a 5% improvement in customer retention can increase customer lifetime value by 25-95%.
2. Calculating Churn Rate: Formulas
Simple Customer Churn Rate
Churn Rate = (Lost Customers in Period ÷ Customers at Beginning of Period) × 100
Example: 200 customers at the beginning of the month, 10 cancel → Churn Rate = (10 ÷ 200) × 100 = 5% monthly
Revenue Churn Rate (MRR Churn)
Revenue Churn = (Lost MRR in Period ÷ MRR at Beginning) × 100
Often more meaningful than customer churn because it shows the financial impact. A small customer who cancels weighs less than a large one.
Net Revenue Churn
Net Revenue Churn = (Lost MRR − Expansion MRR) ÷ MRR at Beginning × 100
Takes into account upselling and cross-selling with existing customers. A negative net revenue churn means: growth among existing customers exceeds losses from cancellations—the ideal state.
3. Types of Churn
- Voluntary churn: The customer actively decides against your product—due to dissatisfaction, a better competitive offer, or changed needs. This is where customer success comes in.
- Involuntary churn: Technical reasons such as expired credit cards, payment failures, or account issues. Can be reduced through dunning management (automated payment reminders).
- Logo churn: Number of lost customer accounts—regardless of revenue.
- Revenue churn: Lost revenue—weighted by customer value.
- Downgrade churn: The customer stays but switches to a lower-priced plan. Not a complete loss, but a revenue decline.
4. Causes of Customer Attrition
The most common churn drivers can be divided into four categories:
4.1 Product/Service Quality
The customer does not achieve the desired results. The value proposition was not delivered. Often an onboarding problem: the customer never fully realized the potential.
4.2 Lack of Relationship
No regular contact, no personal point of contact, no sense of appreciation. The customer experience after purchase is neglected.
4.3 Competition
A competitor offers better performance, lower price, or a more innovative solution. Regular competitive analyses help to counteract in time.
4.4 Changed Needs
The customer’s company is changing—through transformation, growth, or strategic realignment. Regular business reviews identify these changes early.
5. Reducing Churn Rate: Strategies
5.1 Proactive Customer Success
Customer success is the most effective lever: through health scores, regular check-ins, and proactive intervention at risk signals, you can prevent attrition before the customer even thinks about canceling.
5.2 Excellent Onboarding
The first 90 days are critical. Customers who experience their first success moment early (time to value) stay significantly longer. Structure onboarding with milestones and quick wins.
5.3 Feedback Loop with NPS
Regular NPS measurements identify detractors early. A closed-loop process—personal contact within 48 hours of negative feedback—can actively prevent attrition.
5.4 Customer Segmentation
Not all customers need the same level of attention. Segment by CLV and risk profile and invest your customer success resources where the leverage is greatest.
5.5 Integrate Product Feedback
Systematically collecting and implementing customer feedback shows customers that their voice matters—and simultaneously improves the product. Jobs-to-be-Done interviews help understand the real needs.
6. Practical Context: Churn in the DACH Mid-Market
Churn does not only affect SaaS companies—mid-market companies and service providers also suffer from customer attrition:
- Consulting firms: Churn manifests as absent follow-up contracts. Proactive follow-up and regular impulses (e.g., through content marketing) keep the relationship alive.
- SaaS providers: Industry-typical monthly churn rates in B2B: 2-5% for SME customers, 0.5-1% for enterprise customers.
- Subscription models: For physical subscriptions (e.g., boxes), monthly churn is often 8-12%—significantly higher than for software.
Practical example: An innovation consultancy measures that 40% of customers do not place a follow-up order after the initial project. By introducing quarterly “innovation check-ins” and a content strategy with personalized impulses, this value drops to 20%—the CLV doubles.
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7. Frequently Asked Questions
What Is a Good Churn Rate for B2B SaaS?
For B2B SaaS, a monthly churn rate below 2% is considered good, below 1% as excellent. Annually, this corresponds to 10-20% or below 12%. Enterprise customers typically have lower churn rates (0.5-1% monthly) than SME customers (3-5% monthly) because switching costs are higher.
What Is Negative Churn?
Negative net revenue churn means that revenue growth from existing customers (through upselling and cross-selling) exceeds revenue losses from cancellations. This is the ideal state: your existing customer portfolio grows on its own, even without a single new customer. The best SaaS companies achieve a negative net revenue churn of -2% to -5% monthly.
How Do I Identify Customers About to Cancel?
Typical early warning signals: declining usage frequency, no responses to emails, increasing support tickets, lack of participation in meetings or events, negative NPS score, and delayed payments. A customer health score that aggregates these signals makes at-risk customers systematically visible.