See exactly what your churn rate is costing you — and how small reductions compound into enormous ARR differences over time. The most powerful insight in SaaS financial modelling.
| Monthly Churn | MRR at Period End | ARR at Period End | vs Current Churn |
|---|
Churn is the silent killer of SaaS businesses. At 3% monthly churn, you lose 31% of your customer base every year. To just stand still, you must replace that 31% — before growing at all. Reducing churn from 3% to 2% does not sound dramatic, but over 24 months on a £40,000 MRR business adding £5,000 new MRR/month, that 1% improvement is worth over £200,000 in additional ARR.
| Monthly Churn | Annual Churn (approx.) | % of Base Retained/Year | Benchmark |
|---|---|---|---|
| 0.5% | ≈6% | 94% | Excellent |
| 1.0% | ≈11.4% | 88.6% | Good |
| 2.0% | ≈21.5% | 78.5% | Acceptable (SMB) |
| 3.0% | ≈30.6% | 69.4% | Concerning |
| 5.0% | ≈46% | 54% | Critical |
Monthly churn benchmarks: under 0.5% is excellent (enterprise SaaS benchmark), 0.5-1% is good, 1-2% is acceptable for SMB SaaS, 2-5% is concerning, above 5% is critical. Annual equivalents: under 6% excellent, 6-12% good, 12-25% acceptable for high-growth SMB. Enterprise SaaS achieves lower churn through annual contracts, switching costs and account management. SMB/PLG products tolerate higher churn due to faster acquisition cycles.
Four main churn reduction strategies: (1) Improve onboarding — most churn happens in the first 90 days for users who never reached their activation milestone; (2) Proactive customer success — identify at-risk accounts early using usage signals and intervene before cancellation; (3) Annual billing — customers on annual plans churn at 3-5× lower rates than monthly; (4) Feature adoption — customers using 3+ core features churn at dramatically lower rates. Track feature adoption as a leading indicator of churn.