Home » Saas Metrics » Revenue Churn Rate

Revenue Churn Rate

What Is Revenue Churn Rate?

Revenue Churn Rate represents the proportion of recurring revenue that a business loses within a chosen period. It reflects the financial setbacks caused by subscription cancellations, contract expirations, or service downgrades. For companies operating on subscription models, this metric serves as a vital indicator of business stability and long-term growth potential.

Steps to Calculate Revenue Churn Rate

  • Define the time you want to measure (month, quarter, or year). Shorter windows (like monthly) help identify quick retention issues, while longer ones (quarterly or yearly) reveal broader revenue patterns
  • Record the total recurring revenue that existed at the beginning of the chosen time frame. This serves as the reference point against which you will measure losses. Without a clear baseline, the calculation loses accuracy
  • Go beyond just cancellations. Consider income reduction from contract expirations, non-renewals, downgrades to lower-value plans, or clients switching to discounted versions. This ensures you capture all the ways revenue slipped away
  • Take the total amount of revenue lost and divide it by your starting recurring revenue. This step highlights what fraction of your initial income base was not retained during the period
  • Multiply the ratio by 100. Expressing churn as a percentage makes it easier to track over time and benchmark against industry standards

Formula for Revenue Churn Rate

Revenue Churn Rate = (Lost Revenue ÷ Revenue at Start of Period) × 100

Benchmark

Healthy subscription businesses usually maintain a monthly revenue churn rate below 5 percent. Any rate above that signals the need for stronger retention strategies.

Turn Churn Into Growth — Discover strategies to reduce churn and increase expansion revenue with DiGGrowth. Talk to Us!

Just write to us at info@diggrowth.com — we’ll get back to you promptly.

FAQ's

Because losing a small customer and losing a major account can have very different revenue impacts, even if both count as one lost customer.

Only recurring revenue lost due to cancellations, contract expirations, or downgrades. One-time charges are not included.

Yes. If expansion revenue from upgrades or cross-sells exceeds lost revenue, the churn rate may turn negative, which is a positive sign.

Personalized account management, flexible pricing models, proactive customer support, and value-added features all help retain and grow revenue.