Churn rate is the rate at which a company is losing what it has built. Customer churn is the percentage of customers who cancel in a period; revenue churn is the percentage of revenue lost from cancellations and downgrades. Net revenue retention (NRR or NDR) inverts the perspective: it measures the total revenue retained from a cohort after a year, including expansions. An NRR above 100% means expansions exceed churn — the existing customer base grows without new customer acquisition.
Monthly churn rates for early-stage SaaS are typically 2–8% for SMB-focused products and 0.5–2% for enterprise-focused products. The difference reflects contract length, switching cost, and the depth of integration into the customer's workflow. At 5% monthly churn, a company loses more than half its customer base in a year; at 1% monthly churn, it retains 89% of customers annually. These are fundamentally different businesses.
Churn is both a retention metric and a product-market fit signal. High churn in the first 90 days (early churn) indicates onboarding or expectation failure. High churn in months 6–18 indicates a product that provides value in the short term but loses relevance. Churn concentrated among a particular customer segment (small companies, a specific vertical, a particular price tier) gives precise signal for product and go-to-market adjustments. Founders who can diagnose their churn at this level of granularity demonstrate operational maturity.