Customer Churn vs Revenue Churn — What's the Difference?
Customer churn counts the percentage of customers who cancel. Revenue churn (also called MRR churn or dollar churn) counts the percentage of MRR lost. They can diverge significantly: if your highest-paying customers churn, revenue churn will be much higher than customer churn.
For most SaaS decisions, revenue churn is more important — it directly impacts LTV, NRR, and valuation. Track both, but prioritise reducing revenue churn from high-ACV customers.
Net vs Gross Revenue Churn
Gross revenue churn counts only losses. Net revenue churn subtracts expansion MRR from existing customers. A company can have 5% gross revenue churn but 0% net revenue churn if expansion offsets losses — and 120% NRR if expansion exceeds churn. Investors care about net.
The Compounding Effect of Monthly Churn
3% monthly churn sounds manageable. Annualised, it's 31% customer loss — meaning you must replace nearly a third of your customer base just to stay flat. At 5% monthly churn, you're replacing 46% annually.
This is why reducing churn from 3% to 1.5% is not a 1.5% improvement — it doubles average customer lifespan from 33 months to 67 months, and doubles LTV with it.
< 2%
Monthly churn target for B2B SaaS
2×
LTV impact of halving monthly churn
31%
Annual churn from just 3% monthly
1/rate
Formula for average customer lifespan