Every 1% reduction in churn can increase your company value by 12%
Understanding
Customer Churn
Churn is the silent killer of SaaS companies. Learn why customers leave and how to stop them.
Your Churn Prevention Journey
What is Customer Churn?
Churn is when customers stop using your product. It's the opposite of retention, and it's one of the most important metrics for any SaaS business.
The Basic Formula
How churn rate is calculated
Churn Rate = (Customers Lost / Total Customers at Start) × 100
Example: You started the month with 1000 customers and lost 50
(50 / 1000) × 100 = 5% monthly churn rate
Why Churn Matters More Than You Think
Kills Growth
High churn means you're filling a leaky bucket. Every new customer you acquire just replaces one who left.
Example: If you have 10% monthly churn, you need to grow by 10% each month just to stay flat.
Destroys Economics
If customers leave before you recoup acquisition costs, you're losing money on every sale.
Example: CAC = $500, Monthly MRR = $100, Churn after 3 months = You lost $200
Signals PMF Issues
High churn often means you haven't achieved product-market fit. Customers aren't finding value.
Rule of thumb: Monthly churn above 5-7% for B2B SaaS indicates PMF problems
Impacts Valuation
Investors value companies with low churn at 2-3x higher multiples than high-churn companies.
Impact: Reducing churn from 10% to 5% can increase company value by 50%+
The Two Types of Churn
Voluntary Churn
Customers actively choose to leave
Common Reasons:
- →Not getting value from the product
- →Found a better alternative
- →Product is too expensive
- →Poor customer support experience
- →Missing critical features
Good news: This is preventable with feedback! Exit surveys tell you exactly why people leave.
Involuntary Churn
Customers don't mean to leave
Common Reasons:
- →Credit card expired
- →Payment failed
- →Billing address changed
- →Account fraud/security issues
- →Bank declined transaction
Easy fix: Automated email reminders + payment retry logic can recover 20-30% of this churn.
What's a "Good" Churn Rate?
Rule of Thumb: If your monthly churn is above 7%, you have a serious retention problem that needs immediate attention.
The True Cost of Churn
Let's say you have 1000 customers paying $100/month with 5% monthly churn
What if you reduced churn by just 2%?
You just saved $24,000/year! 💰
Your Churn Prevention Journey
Ready to Reduce Churn?
Start measuring and preventing churn with in-product feedback surveys that tell you exactly why customers leave.
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