Churn

Churn is customers lost in a period ÷ customers at the start of the period. 5% monthly churn means 5 of every 100 customers cancel each month. Doesn't sound much — but compounded, it means losing roughly half your customer base each year if you stopped acquiring.

Two kinds worth distinguishing:

• Customer churn: the % of customers who leave. Simple to track.
• Revenue churn: the % of revenue lost (some customers may downgrade rather than fully cancel, or larger customers may leave at different rates than smaller).

For SaaS, monthly churn benchmarks roughly:

• Under 1%/month — excellent. Top-quartile SaaS.
• 1-2%/month — healthy.
• 3-5%/month — concerning at scale; works at small scale.
• Over 5%/month — the leaky bucket eats all your acquisition efforts.

Halving churn from 4% to 2% nearly doubles average customer lifetime (and therefore LTV). Halving CAC requires gigantic effort. Halving churn is often easier — usually a product or onboarding fix — and pays back more.

The single best churn lever for most products is improving onboarding. Customers who don't experience the core value in the first session churn at much higher rates than those who do.