Churn is one of the most critical SaaS metrics, directly impacting revenue growth, customer retention, and long-term business sustainability. For finance leaders, understanding and accurately calculating churn is essential to forecasting revenue, identifying risks, and optimizing customer success strategies. In this guide, we’ll break down the different types of churn, how to calculate them, and why they matter for your SaaS business.

What Is Churn in SaaS?

Churn represents the percentage of customers or revenue lost over a given period. High churn rates indicate that customers are not finding enough value in your product to continue their subscriptions. Keeping churn low is a top priority for any SaaS business aiming for sustainable growth.

There are two main types of churn:

•Customer Churn (Logo Churn): The rate at which customers cancel their subscriptions.

•Revenue Churn: The rate at which revenue is lost due to customer cancellations or downgrades (contraction).

Each provides valuable insights, but revenue churn is particularly important for finance teams managing revenue projections and growth strategies.

How to Calculate Customer Churn

Gross Revenue Churn Rate

This measures how much revenue you lost from existing customers (excluding expansion/upsell).

FORMULA: Gross Revenue Churn Rate = (Revenue Lost from Existing Customers ÷ Starting MRR from Existing Customers) × 100

Example:

• Starting MRR from existing customers = $100,000
  
  
• Downgrades + Cancellations = $10,000
  
  
• Gross Churn = 10,000100,000×100=10%\frac{10,000}{100,000} \times 100 = 10\%100,00010,000​×100=10%

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Net Revenue Churn Rate

This includes expansion (upsell/cross-sell), giving a more complete picture of revenue retention.

FORMULA: Net Revenue Churn Rate = ((Revenue Lost from Existing Customers – Expansion Revenue) ÷ Starting MRR from Existing Customers) × 100

Example:

• Starting MRR from existing customers = $100,000
  
  
• Downgrades + Cancellations = $10,000
  
  
• Expansion (Upsell) = $5,000
  
  
• Net Churn = 10,000−5,000100,000×100=5%\frac{10,000 - 5,000}{100,000} \times 100 = 5\%100,00010,000−5,000​×100=5%

Customer (or logo) Churn Rate

If you're measuring customer churn (not revenue), then it's:

FORMULA: Customer Churn Rate = (Customers Lost During Period ÷ Customers at Start of Period) × 100

Example:

Example:

• Customers at start = 500
  
  
• Customers lost = 25
  
  
• Customer Churn = (25 ÷ 500) × 100 = 5%

Why Churn Matters for SaaS CFOs

1. Revenue Forecasting: High churn rates signal potential revenue instability and can impact long-term financial planning.

2. Customer Lifetime Value (CLV) Impact: Churn affects the expected lifetime revenue from a customer, influencing acquisition budgets and retention strategies.

3. Investor and Board Expectations: SaaS businesses with low churn and strong net revenue retention (NRR) attract more investment and valuation growth.

4. Customer Health and Product Fit: A high churn rate often indicates product-market misalignment or customer dissatisfaction.

How TrueRev Helps SaaS Companies Manage Churn

Tracking churn accurately and in real time is critical for SaaS finance teams. TrueRev simplifies churn analysis by automating revenue tracking, MRR calculations, and customer retention insights—so finance leaders can proactively address churn risks and improve retention strategies.

With TrueRev, you can:

✅ Monitor churn and retention trends in real time.

✅ Identify at-risk customers before they churn.

✅ Automate revenue reporting to reduce manual errors.

Final Thoughts

Churn is an unavoidable challenge for SaaS businesses, but understanding how to calculate and reduce it is key to long-term growth. By using automated tools like TrueRev, finance teams can gain greater visibility into revenue trends and take action to retain customers more effectively.

Schedule a Demo Today.