Churn for SaaS Companies
What is churn?
Churn is a percentage measuring the customers that unsubscribe and the customers who do not renew. Churn for SaaS companies reflects product market fit. If churn is high, you have a weak product-market fit. Conversely, you may have a good product-market fit with negative churn which is reflective of your customers needing more of your product from either a usage or user metric. Measuring churn on both monthly and annual levels helps you see the impact of any pricing or product changes you made, as well as the endurance of your growth.
To calculate churn you add together the count of customers that un-subscribe, or do not renew their subscription, and divide it by the number of customers you had on the first day of your measurement period. Many cloud accounting solutions for SaaS companies include a SaaS metrics dashboard and automate the churn calculation with real-time data.
Sage Intacct SaaS metrics dashboard reflecting revenue churn and customer churn.