According to recent research from Oracle, 94% of business leaders believe the right data and insights can help them make better finance decisions. And for SaaS companies, one of the most consequential metrics to keep an eye on is customer churn.
SaaS churn rate is a key metric for gauging customer health, but it’s also a central input for finance teams’ revenue planning and growth forecasts. Especially in the current market environment, where sluggish new sales, macroeconomic uncertainty, and rapid AI-led tech disruption have collided, customer retention is center stage.
Fortunately, with strong data and cross-functional analysis, finance teams are better positioned to anticipate churn.
Read on to learn why churn occurs, gain benchmarks to see how your business compares against other SaaS companies, and uncover tips to boost retention and ensure that company growth remains healthy.
Key Findings
The average annual SaaS churn rate in 2025 is approximately 3.8%, or 4.9% for B2B SaaS, though this can vary significantly.
A "good" churn rate for SaaS B2B companies is generally considered to be below 1% per month, translating to an annual churn rate below 5%.
The two primary types of churn are customer churn and revenue churn, with revenue churn providing a more comprehensive view of business health for finance teams.
Increasing cross-functional collaboration and predictive forecasting capabilities for FP&A helps identify at-risk customers, predict the financial impact of churn, and implement data-backed retention strategies.
In SaaS, churn rate measures the percentage of customers or recurring revenue lost within a set period. Churn can impact future revenues, cash flow management, valuation, and more.
A higher rate dilutes net revenue retention, which means a business needs a higher volume of new sales to maintain topline numbers.
On the other hand, a low churn rate signals that a company retains clients well, which is a key competitive differentiator in a more challenging market.
Companies that keep churn in check compound their revenue faster and can weather market turbulence more effectively.
There are two ways to look at churn: losses in your customer base and in your revenue numbers. SaaS finance teams need to understand how each impacts business goals so they can provide actionable insights to correct churn.
Here’s the main difference between the two:
This basic attrition metric shows the percentage of your customers who actively cancelled (voluntary churn) or were lost due to preventable payment issues (involuntary churn) over a certain timeframe.
Customer churn is straightforward and central for assessing product-market fit and customer experience, but it lacks nuance when it comes to revenue impact. In reality, losing a single high-value client could affect the business more than losing several small ones.
Revenue churn measures the percentage of recurring revenue lost over a specific period due to customer cancellations, downgrades or non-renewals.
Unlike customer churn, which simply counts lost customer accounts, revenue churn measures the financial impact of those losses on the company’s recurring revenue base. This makes revenue churn a critical metric for SaaS businesses where customers vary widely in size and revenue contribution.
However, businesses need to make the distinction between gross and net revenue when assessing churn:
Gross revenue churn measures all revenue lost from existing customers (without offsetting expansions).
Net revenue churn includes lost revenue but subtracts any gained through upsell or cross-sell, making it a superior metric for financial planning.
Negative churn signals a healthy, growing customer base and is a strong indicator of product value and customer satisfaction.
For churn data to be trustworthy, it’s crucial to maintain consistent measurement and clear timeframes. Consistent definitions and high-quality data can unmask hidden risks. Here are two easy-to-use calculators for customer and net revenue churn, so you can easily keep both of these SaaS metrics top-of-mind.
Customer churn rate measures the percentage of customers a SaaS company loses during a specific time period, typically monthly or annually. It reflects customer attrition by counting the number of customers lost relative to the total customer base at the beginning of the period:
This metric helps companies understand overall retention and product-market fit. However, it doesn’t account for the revenue impact of losing customers, since some customers generate more revenue than others.
Example: If a SaaS company starts the month with 1,000 customers and loses 20 customers by month-end, the customer churn rate is calculated as (20 ÷ 1,000) × 100 = 2%.
While this shows that 2% of customers left, it doesn’t reveal whether these were small or large accounts, a key insight for financial planning and revenue forecasting.
Net revenue churn rate measures the percentage change in recurring revenue from existing customers over a period, typically a month, measured in monthly recurring revenue (MRR). This accounts not only for lost revenue from cancellations or downgrades but also offsets revenue gained through expansions, upsells, or cross-sells:
This metric provides a more comprehensive and financially meaningful view of customer retention and growth because it reflects the impact churn has on the company’s recurring revenue stream.
Positive net revenue churn indicates that lost revenue outpaces gains
Negative churn shows that expansion revenue exceeds losses, which is an ideal scenario for growing SaaS businesses
Example: A SaaS company has $500,000 in MRR at the start of a quarter. During that quarter, it loses $30,000 in MRR from cancellations and downsells but gains $40,000 from upsells to existing customers. Using the formula, net revenue churn would be (($30,000 - $40,000) ÷ $500,000) × 100 = -2%.
This negative churn rate means expansion revenue more than compensates for lost revenue, highlighting strong account growth and effective retention strategies. FP&A teams rely on this metric to model financial outcomes and guide investment in customer success programs.
Benchmarking SaaS churn rates has become more nuanced as companies mature, diversify pricing models, and target varied market segments.
Below is an overview of key 2025 churn benchmarks, sourced from data from Recurly as well as Paddle’s Q1 and Q2 2025 SaaS market reports and insights:
|
Segment |
Average Monthly Churn Rate |
Average Annual Churn Rate |
Factors Affecting Churn |
|
B2B SaaS (Overall) |
0.3%–1% |
3.5%–5% |
Company size; bigger firms tend to have lower churn |
|
SMB SaaS |
3%–7% |
30%–58% |
Higher churn due to price sensitivity, contract flexibility, and less brand loyalty |
|
Enterprise SaaS |
1% or less |
10% or less |
Longer contract terms and deeper product integrations encourage retention |
|
Usage-based or Freemium |
5%–10%+ |
50%+ |
Lower commitment and a central focus on upsell lead to higher churn |
|
B2C SaaS |
0.4%–1% |
6%–8% |
Typically shorter contracts, easier switching |
|
Voluntary Churn (B2B) |
2.6%–3.3% |
N/A |
Customer-initiated cancellations |
|
Involuntary Churn (B2B) |
0.8%–1.1% |
N/A |
Payment failures, billing issues |
While the B2B SaaS industry often cites a "good" churn rate as below 1% monthly (or roughly 5% annually), the reality is that churn can vary heavily, based on these factors:
Company size: Small and midsize businesses (SMBs), for instance, typically experience higher churn rates due to shorter contract terms, lower switching costs and resource constraints impacting customer success efforts. Enterprise SaaS providers, on the other hand, tend to experience lower churn thanks to longer-term contracts, deeper integrations and higher switching friction.
Pricing structure: Usage-based or freemium models often lead to higher churn, as customers can easily complete a trial or disengage without significant upfront commitment. Subscription tiers deliver lower churn rates through higher customer investment and customization, fueling annual recurring revenue (ARR). Average revenue per user (ARPU) also informs churn expectations, with higher-ARPU customers sticking around longer but also requiring more intensive management.
Companies that monitor and benchmark their churn have an advantage when strategizing for retention and customer success.
In the chart above, Paddle’s data highlights that slowing growth and rising retention pressures make it essential for SaaS companies to benchmark churn against their peers in the same segment. Doing so puts performance in context and enables finance teams to anticipate the revenue impact of churn risks before they surface.
Recurly’s analysis further demonstrates how churn can be a reflection of a company's strategy. The study found a median overall churn rate of 3.27% annually, with roughly three-quarters of that driven by voluntary cancellations and the remainder tied to involuntary factors.
What stood out was that more than half of the companies in the study reduced their churn year-over-year, most often by leaning into retention-focused practices such as:
Customer success investment
Flexible plan options
Pause features
Loyalty incentives
Shored-up billing processes
Deliberate retention strategies not only lower churn but also make revenue more predictable and forecasting more reliable, especially critical for SaaS firms where predictability underpins long-term planning.
Because churn directly shapes growth rates, it also influences the Rule of 40, a cornerstone of SaaS financial health. Recent SaaS statistics confirm that there is no universal churn rate, which is why tailoring benchmarks by company size, contract length, or ARPU can lead to more reliable forecasting and long-term planning.
With the right benchmarks, finance leaders can better interpret churn signals, model future scenarios, and build retention playbooks that sharpen decision‑making while reinforcing competitive advantage.
FP&A is now a key pillar of proactive churn management. Not only can FP&A teams track lagging metrics like net revenue retention (NRR) or renewal invoice paid rate (RIPR) to anticipate churn, but they can also play a more direct role in reducing it.
FP&A solutions today can integrate both finance and customer success data to enable teams to carry out scenario planning and dynamic modeling to better identify at-risk accounts. This way, FP&A helps executive leadership gauge the ROI of revenue retention efforts and allocate resources to the best initiatives.
Let’s take a look at three key ways FP&A teams can help report on churn and influence churn reduction.
A core strength of modern FP&A lies in ongoing customer segmentation by metrics like ARR and lifetime value (LTV). This continual process uncovers the hidden pockets of high-value customers who are at risk of churning, giving you a good sense of where to focus your retention efforts.
Instead of treating all churn equally, finance teams should identify the most financially impactful segments and advise customer success teams to increase efforts to retain those strategically critical clients.
Insights from this segmentation can also reveal why certain segments experience higher attrition, like pricing sensitivity in a specific cohort or usage disparities among high-LTV accounts.
Churn is also an input for FP&A teams to use in their scenario modeling and forecasting.
For example, FP&A teams can model a base case, a worst case with higher churn, and a best case where retention programs succeed. In turn, teams can see how each scenario would impact revenue growth, hiring capacity, and other factors.
These models allow FP&A teams to quantify the expected ROI of retention initiatives before investing. Churn analysis effectively becomes a proactive tool for smarter resource allocation and long-term planning.
Lower churn means longer customer lifetimes and higher lifetime value to customer acquisition cost (LTV/CAC) ratios. Reducing churn elevates LTV by extending customer revenue life span and increasing the efficiency of sales and marketing spend.
For FP&A teams, this creates an opportunity to actively optimize the ratio by reallocating budget toward retention-improving initiatives like customer success programs. At the same time, FP&A can better scrutinize acquisition spend to ensure it targets the segments with the best retention profiles.
Modeling how shifts in churn affect both LTV and CAC helps finance leaders identify which levers deliver the greatest return on investment. In short, improved churn management signaled by LTV/CAC metrics brings together customer success and financial strategy for long-term SaaS success.
With the right data-driven approach, FP&A teams can move from passive measurement to proactive management of churn, taking insights to the rest of the organization to crush preventable attrition and create a defensible growth engine.
Vena empowers finance teams to move beyond backward-looking reporting. You can connect real-time data from all your source systems, such as your ERP and CRM, to form actionable insights across the business to easily forecast and plan for the short-term and long-term future.
Explore how Vena supports SaaS businesses with smarter, more agile revenue planning and reporting.