SaaS economics

Churn Rate

The percentage of customers (or revenue) that cancels in a given period — typically calculated monthly or annually.

What it actually means

Churn rate is calculated two ways: customer churn (% of customers who cancel) and revenue churn (% of MRR lost to cancellations). A SaaS with 5% monthly customer churn loses 60% of customers annually (compounded). For coaching software targeting solo operators, healthy monthly churn is 2-4%; below 2% is excellent; above 5% is a retention crisis. Negative net revenue churn (expansion exceeds churn) is the gold standard — happens when existing customers upgrade tiers faster than others cancel.

Distinguishing it from look-alikes

Voluntary churn (customer chose to cancel) and involuntary churn (payment failed, dunning gave up) are different problems with different fixes. Involuntary churn is solved by transparent dunning + payment-update flows. Voluntary churn is solved by product-market fit + customer success. Most SaaS founders conflate the two and apply the wrong fix. Cadence tracks both separately.

Examples

100 customers, 4 cancel in month

4% monthly customer churn — healthy for B2B SaaS

$10K MRR, $300 lost to cancels, $400 expansion

Net negative revenue churn = best-case

Voluntary vs involuntary split

If 60% of churn is involuntary (failed payments), the fix is dunning, not product. Different problem entirely.