How to Calculate Churn Rate: SaaS Formula & Full Guide
Published on March 13, 2026 · Jules, Founder of NoNoiseMetrics · 11min read
Updated on April 15, 2026
Churn rate calculation comes down to one formula: customers lost divided by customers at the start, multiplied by 100. The denominator trips up more SaaS founders than any other part of the equation. This guide walks through the exact steps for the customer and revenue variants, monthly-to-annual conversion, six common mistakes, and how to pull a clean number directly from Stripe data.
TL;DR. Churn Rate Formulas
Customer churn rate = (Customers Lost ÷ Customers at Start) × 100
Revenue churn rate = (MRR Lost ÷ MRR at Start) × 100
Monthly churn ≠ Annual churn ÷ 12. Use: Annual Churn = 1 − (1 − Monthly Churn)^12
Customer Churn Rate Formula
The churn rate formula for customers is:
Customer Churn Rate = (Customers Lost in Period ÷ Customers at Start of Period) × 100Define each variable precisely so the number stays comparable across months:
- Customers Lost: subscriptions cancelled + non-renewals + failed payments never recovered by the end of the period. The numerator does not subtract new customers acquired mid-period.
- Customers at Start: paying customers on day 1 of the period. The denominator does not include customers who signed up during the period.
Worked example:
- February start: 120 paying customers
- New customers in February: 15
- Customers who cancelled in February: 8
- Failed payments not recovered: 2 (also lost)
Customer Churn Rate = (8 + 2) ÷ 120 × 100 = 8.3%The 15 new customers are irrelevant to this month’s calculation. They appear in March’s denominator instead.
What 8.3% monthly churn means in practice: at this rate you lose roughly 66% of your customer base annually. You would need to acquire 10 new customers every month just to keep the count flat. A churn rate at this level is a retention emergency, not a marketing problem.
For context on what the number means for your business, see What Is Churn Rate.
Revenue Churn Rate Formula
Revenue churn rate (also called MRR churn rate) measures dollar impact, not headcount:
Revenue Churn Rate = (MRR Lost in Period ÷ MRR at Start of Period) × 100MRR Lost includes:
- MRR from cancelled subscriptions
- MRR reduction from plan downgrades
- MRR from failed payments not recovered by the end of the billing cycle
MRR Lost does not include expansion MRR — that is counted separately in the net revenue churn rate.
Worked example:
- March starting MRR: €18,500
- MRR lost from cancellations: €740
- MRR lost from downgrades: €230
- Expansion MRR from upgrades: €510
Gross revenue churn rate:
Gross Revenue Churn = (€740 + €230) ÷ €18,500 × 100 = 5.2%Net revenue churn rate:
Net Revenue Churn = (€970 − €510) ÷ €18,500 × 100 = 2.5%The expansion revenue cuts the effective number in half. This is why NRR-focused companies obsess over upsell as much as retention. For the full mechanics of net vs. gross churn, see gross churn vs net churn, Net Revenue Retention, and Revenue Churn vs. Customer Churn.
Step-by-Step Churn Rate Calculation
Follow these steps to compute the churn rate correctly for any period:
Step 1. Define your period. Use calendar months as your standard unit. Monthly is the industry default for SaaS. Weekly is too noisy; quarterly hides month-to-month problems. Always use the same period consistently so you can compare the number across months without normalization headaches.
Step 2. Count active paying customers at period start. Active paying customer = has a live subscription and has been billed successfully. Exclude: free trials, paused subscriptions (no active billing), customers who joined mid-period. If a customer’s payment is currently in dunning retry (Stripe is retrying a failed charge), count them as active at period start, but if the payment fails completely by period end, they move into the lost count and into the numerator.
Step 3. Count customers lost during the period. Lost = cancelled OR non-renewed OR payment failed AND not recovered by period end. Include involuntary churn (failed payments) — this is real revenue loss, even if the customer didn’t intend to leave, and it belongs in the total. Split involuntary from voluntary in a separate column if you want to track payment recovery separately.
Step 4. Apply the formula.
Churn Rate = (Customers Lost ÷ Customers at Start) × 100Round the result to one decimal place. Reporting “7.5% churn” is more actionable than “7.48%” — the precision doesn’t represent real signal at most SaaS scales.
Step 5. Segment your churn. Do not stop at one aggregate number. Segment by acquisition channel, pricing plan, company size, or signup cohort. A 5% aggregate monthly churn rate might be 2% for annual customers and 9% for monthly customers — the aggregate masks the story entirely. Cohort analysis is the standard tool for finding which customer segments produce the worst numbers.
Step 6. Calculate monthly for trend tracking. Track the number month over month. A single value is a data point. A six-month trend is diagnostic. If churn is rising, investigate which cohort or acquisition channel is driving it, not what the headline figure is.
Step 7. Convert to annual for benchmarking. Investors and benchmark reports use annual figures. Apply the compound formula (see next section) to convert monthly into annual.
Monthly to Annual Churn Rate Conversion
Simple multiplication understates the impact of a monthly figure. The correct annual churn rate formula is compound:
Annual Churn Rate = 1 − (1 − Monthly Churn Rate)^12Example: 4% monthly → Annual = 1 − (0.96)^12 = 1 − 0.612 = 38.8% (not 48%)
Conversion table:
| Monthly Churn | Annual Churn | Annual Retention |
|---|---|---|
| 0.5% | 5.8% | 94.2% |
| 1.0% | 11.4% | 88.6% |
| 2.0% | 21.5% | 78.5% |
| 3.0% | 30.6% | 69.4% |
| 4.0% | 38.8% | 61.2% |
| 5.0% | 45.9% | 54.1% |
| 7.0% | 58.1% | 41.9% |
| 10.0% | 71.8% | 28.2% |
The compounding gap matters for investor communication. If your monthly churn rate is 3%, an investor who assumes 36% annual is overstating your problem. The correct annual figure is 30.6% — a meaningful difference at scale.
Churn Rate Benchmarks by Segment
Once you have your number, you need a reference point. Data from Recurly 2024 Subscription Report and SaaS Capital 2024 Retention Study:
| Segment | Monthly Churn | Annual Churn |
|---|---|---|
| Consumer SaaS | 4–8% | 38–64% |
| SMB SaaS (monthly billing) | 3–5% | 31–46% |
| SMB SaaS (annual billing) | 1–3% | 11–31% |
| Mid-market SaaS | 1–2% | 11–22% |
| Enterprise SaaS | under 1% | under 10% |
For bootstrapped SaaS with monthly billing in the SMB space: under 4% monthly is acceptable, under 2% monthly is strong. If you sit above 6% monthly, the churn rate itself is your primary growth constraint — not acquisition, not conversion, not pricing.
Annual contracts consistently show a 2–3× lower monthly figure than equivalent monthly billing customers. If your product creates durable value, moving customers toward annual plans is the highest-leverage retention action available.
ASC 606 and Accounting Note
Under ASC 606, recognized revenue and the cash-collected number diverge. A customer who pays €1,200 upfront for an annual plan is recognized at €100/month. If they cancel mid-year and request a prorated refund, the calculation should reflect the unrecognized balance, not the headline cancellation. For most bootstrapped SaaS reporting, the cash-basis figure is fine — but if you raise capital, your auditor will want reconciliation with deferred revenue. Track both views once you cross €1M ARR.
Common Mistakes in Churn Rate Calculation
1. Including free trials in the denominator. Trials aren’t customers. Including them inflates the denominator and produces an artificially low number. Count only active paying subscriptions on day 1 when you compute the value.
2. Including mid-period signups in the starting count. A customer who signed up on March 15th is not “at risk” of churning in March — they have only been a customer for two weeks. Include them in April’s starting count only.
3. Ignoring involuntary churn. Failed payments are churn. If a card expires and the customer doesn’t update it, they’re lost — whether or not they intended to cancel. Track involuntary separately to diagnose payment recovery, but always include it in the total.
4. Subtracting new customers from the numerator. “We lost 10 but gained 15, so net is −5.” Net is not churn. Churn is only the losses. New customers go into next month’s denominator, not this month’s numerator.
5. Mixing monthly and annual customers in one formula. Monthly subscribers churn monthly. Annual subscribers churn annually (at renewal). Don’t pool them in the same denominator unless you normalize. Best practice: calculate separately for each cohort, then weight by MRR contribution.
6. Using the wrong period end date. A cancellation processed on March 31st at 11:59 PM should be in March’s count. Define your period cutoff clearly and apply it consistently across months.
When to Use Customer Churn vs Revenue Churn
Calculate the customer churn rate when you need to understand headcount dynamics: acquisition required to maintain flat growth, support load, trial-to-paid conversion impact.
Calculate the revenue churn rate when you need to understand financial impact: which plan tiers are leaking most revenue, whether high-value customers retain better than low-value ones, how to prioritize retention investment.
Two scenarios where each tells a different story:
Scenario A: You lose 10 customers at €9/month and retain 200 customers at €99/month. Customer churn: high. Revenue churn: negligible. You’re losing the right customers.
Scenario B: You lose 2 customers at €499/month and retain 50 customers at €29/month. Customer churn: low (3.8%). Revenue churn: 13.2%. You’re retaining a lot of low-value accounts while losing your best ones — a crisis disguised as a healthy churn rate number.
Always calculate revenue churn if you have significant pricing variation across plans. Customer churn alone will mislead you. For the full playbook on reducing the numbers you’ve just calculated, see How to Reduce Customer Churn.
Calculate Churn Rate from Stripe: Stripe-Native Guide
Stripe stores every cancellation, failed payment, and downgrade event you need to compute the value. Here is how to extract the data directly:
Finding cancelled subscriptions in Stripe:
Go to Billing → Subscriptions and filter by Status: Canceled. Add a date filter for your measurement period. The count returned = customers who churned voluntarily in that period (plus any failed-payment subscriptions that fully expired). This count becomes your churn rate numerator.
Separating voluntary from involuntary:
In Stripe’s subscription list, cancellation_reason differentiates:
cancellation_details.reason: payment_disputedorcancellation_details.reason: payment_failed= involuntary churn- Empty or other reasons = voluntary churn
Calculating MRR lost (revenue churn rate):
For each cancelled subscription: take the most recent invoice amount and normalize to monthly (annual subscriptions ÷ 12). Sum all cancelled subscription MRR values for your period = MRR lost from cancellations. Add downgraded subscription MRR differences to get the gross revenue churn rate.
The problem with manual Stripe extraction:
Stripe’s UI doesn’t calculate the value natively. You are building a spreadsheet from filtered exports, which is error-prone and time-consuming. Mid-month cancellations, prorations, and multi-item subscriptions all create edge cases that distort the result if you miscount.
Automated tracking:
Connect your Stripe account to NoNoiseMetrics. Customer and revenue churn are calculated automatically, including the involuntary/voluntary split. Real-time, no exports required.
Calculate churn rate from Stripe → Free up to €10k MRR.
FAQ
What is the formula for churn rate?
Customer churn rate = (Customers Lost ÷ Customers at Start of Period) × 100. Revenue churn rate = (MRR Lost ÷ MRR at Start of Period) × 100. Use the customer formula to measure headcount retention. Use the revenue formula to measure dollar retention. Both are standard SaaS churn rate calculations — which one to use depends on your decision context.
How do you do a monthly churn rate calculation?
Count your paying customers on day 1 of the month (the denominator). Count customers who cancelled or had unrecovered failed payments during that month (the numerator). Divide and multiply by 100. The monthly churn rate calculation excludes customers who joined mid-month from both numerator and denominator.
How do you convert monthly churn rate to annual churn rate?
Use the compound formula: Annual = 1 − (1 − Monthly)^12. Never multiply the monthly figure by 12 — that ignores compounding and overstates the real annual churn rate. A 5% monthly produces a 46% annual churn rate using the correct formula, not 60% from simple multiplication.
What is a good churn rate for SaaS?
For bootstrapped SMB SaaS with monthly billing: under 4% monthly is acceptable, under 2% monthly is strong. Enterprise SaaS targets a churn rate below 1% monthly. The benchmark that matters most is your own trend — is your churn rate improving cohort over cohort? Absolute numbers matter less than trajectory.
How do you calculate churn rate in Excel?
Divide customers lost by customers at the start of the period, then multiply by 100. In Excel: =B2/A2*100 where A2 = start customers and B2 = customers lost. For monthly-to-annual conversion: =1-(1-C2)^12 where C2 = monthly value as a decimal. The Excel approach to the churn rate requires accurate input data, which means manually exporting from Stripe each month.
What period should you use for the churn rate calculation?
Calendar months are the standard for SaaS churn rate calculation. Monthly is granular enough to catch problems early and normalized enough to make month-over-month comparison valid. Weekly is too volatile to be actionable. Quarterly hides monthly deterioration. If you have annual contracts, also track an annual renewal rate separately from your monthly churn rate.
How do you account for new customers in the churn rate calculation?
New customers acquired during a period are excluded from that period’s churn rate calculation. They appear only in the following period’s starting count. If you start March with 100 customers, acquire 20, and lose 8, your March churn rate is 8/100 = 8% — not 8/120 = 6.7%. The 20 new customers face their first churn event in April.
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