Hitting aggressive quarterly sales targets feels incredible. The sales team celebrates a massive win, high-fives fly around the office, and the pipeline looks healthier than ever. But then you pull the monthly financial report. You see your Annual Recurring Revenue (ARR) is flat. You are running full speed just to stay in the same place.
This is the reality of unmanaged churn. It quietly hollows out your business from the inside while everyone focuses on acquisition. To stop the leak, you need to understand exactly who leaves and how much revenue they take with them.
In this guide, we break down the two specific metrics you need to diagnose the problem: logo churn and revenue churn. You will learn how to calculate each effectively, which benchmarks indicate a healthy business, and how to use these numbers to protect your growth.
Defining churn: logo churn and revenue churn
You need to track retention in two dimensions to get the full picture.
Logo churn measures the percentage of customers (or "logos") you lose during a specific period. You treat every customer the same in this calculation. It doesn't matter if they pay you $50 or $50,000. If you start the month with 100 customers and 5 decide to leave, you have 5% logo churn. This metric tells you about the volume of customers leaving your product.
Revenue churn tracks the actual dollars walking out the door. It accounts for lost value from cancellations, downgrades, and non-renewals. If you start with $100,000 in Monthly Recurring Revenue (MRR) and lose $8,000, your gross revenue churn sits at 8%. This metric tells you about the value leaving your business.
The core difference lies in the weighting. Logo churn gives every lost customer equal weight. Revenue churn weights each loss by its financial impact.
Key differences between logo churn and revenue churn
Tracking both metrics uncovers important business dynamics because they tell distinct stories. Logo churn highlights your overall retention ability and product-market fit. Revenue churn reveals if your revenue base is shrinking and helps predict cash flow.
You might see low logo churn mixed with high revenue churn. This happens when you hold onto many small customers but lose a few massive accounts. It signals that your product might be failing your most valuable users.
Conversely, you might lose 10 small customers at $500 each but keep one big customer at $5,000. Your revenue looks stable, but your logo churn spikes. This indicates a problem with smaller users, perhaps due to pricing or onboarding friction for that specific segment.
This gap helps you make decisions. Strong revenue retention with weak logo retention suggests your product works better for larger accounts. High logo retention with dropping revenue warns that you are losing your enterprise clients. Check out our gross dollar retention guide for more context. You need both metrics to catch issues like losing small customers under the radar while big clients stay.
How to calculate both churn metrics
Clear formulas and consistent methods reveal the right retention insights.
Standard logo churn rate
The formula for logo churn rate considers the count of customers.
Logo churn (%) = (customers lost during period ÷ customers at start of period) × 100
Let's say you start January with 200 customers and lose 8 of them. This gives you a logo churn of 4%. Every customer counts the same here. This metric helps you judge overall customer satisfaction and whether your product fits the broad market.
You should segment logo churn by customer group, channel, or plan. You might find customers from one marketing source churn at a higher rate. This points to onboarding gaps or a mismatch between marketing promises and product reality.
Gross revenue churn
Gross revenue churn measures revenue lost before you consider any expansion revenue from existing customers. It focuses purely on what you lost.
Gross revenue churn (%) = (contraction MRR + churn MRR) ÷ starting MRR × 100
This covers cancellations and downgrades. Start with $100,000 MRR, lose $3,000 in cancellations and $2,000 in downgrades. Your gross revenue churn is 5%.
Gross revenue churn pairs with gross dollar retention. Our GDR glossary shows this link directly. A GDR of 92% means you have 8% gross churn. Churn shows what left while GDR shows what stayed.
Net revenue churn
Net revenue churn creates a holistic view by subtracting expansion revenue from your lost revenue.
Net revenue churn (%) = (churn MRR + contraction MRR - expansion MRR) ÷ starting MRR × 100
Net revenue churn can be distinct because it can be negative. If you lose $5,000 but gain $7,000 from expansions (upsells and cross-sells), your net revenue churn is -2%. This is often called "net negative churn." It means your current customer base becomes more valuable over time, even if you don't add a single new logo.
Net revenue churn ties directly to net revenue retention (NRR). NRR at 105% means net revenue churn is -5%. If your NRR is above 100%, expansion covers all losses. This acts as a powerful growth engine for SaaS businesses.
Cohort-based churn analysis
Cohort churn analysis tracks groups of customers that joined at the same time. For example, you follow everyone who joined in Q1 2026 and see how long they stay.
This uncovers patterns hidden by aggregate numbers. Is churn concentrated in the first three months? That signals onboarding issues. Does it spike at month 13? That signals a renewal problem. Many companies see higher churn early as poor-fit customers leave, then retention stabilizes.
We cover cohort tracking and trends by tier, region, or signup date in our cohort modeling guide.
Dollar-weighted logo churn
Dollar-weighted logo churn blends customer count and revenue principles. You give more weight to customers who contribute more revenue when counting churn events.
This tells you if your churned customers were high-value or low-value relative to your average. You might see standard logo churn at 5% but dollar-weighted logo churn at 8%. That discrepancy screams that higher-value customers are leaving. If dollar-weighted churn is lower than standard logo churn, you are keeping your biggest customers while smaller accounts churn.
Key components and considerations
To measure churn right, set out clear definitions and use a consistent method. Several small factors can throw your metrics off if you don't handle them carefully.
Define the churn event
Start by defining a churned customer explicitly. Does churn mean complete cancellation? Does it count when a specific product line is removed? What happens if a customer goes dormant but doesn't cancel? Spell out your rules. Most finance teams count churn the moment the subscription period ends and renewal fails, not just when the user clicks "cancel."
Consistency in timeframes
Pick your measurement period. Monthly churn gives fast feedback but can swing wildly in smaller companies. Quarterly churn smooths out the noise. Annual churn gives a big-picture view but updates too slowly for tactical fixes. As our GDR guide explains, set one cadence and stick to it so your trends are reliable.
Choosing the denominator
Decide your denominator carefully. Most teams use customer count or MRR at the start of the period. Some average the count across the period to smooth fluctuations. Both methods work. What matters is consistency. Changing this definition quarter-to-quarter muddies the picture.
Voluntary vs. involuntary churn
Always separate voluntary churn from involuntary churn.
- Voluntary churn comes from customers who leave on purpose. They found a competitor or didn't see value.
- Involuntary churn happens when payments fail or cards expire. This is often an operational issue. You can verify and win these back with better dunning (payment recovery) processes.
Contraction vs. full churn
Track contraction and full churn separately. Contraction is when a customer downgrades but stays. Full churn means the customer leaves entirely. Treating downgrades the same as full churn hides important detail about customer health. A downgrade is a saveable moment. A cancellation is a lost relationship.
Reactivation logic
Decide how to handle reactivated customers. If a churned customer returns after two months, do you count them as "new" business or a "churn reversal"? Make a rule. We recommend setting a window (e.g., 90 days). Within that window, it's a reversal. Outside that window, it's a new sale.
Connecting churn to other vital SaaS metrics
Churn is not an island. It impacts all your key financial metrics and your forecasts.
Customer lifetime value (LTV) depends heavily on churn rates. See the formula in our CLV guide. Lower churn means longer lifetimes. Longer lifetimes mean higher LTV. If churn is high, you burn through your addressable market and struggle to earn back acquisition costs.
Net dollar retention (NDR) is the inverse of net revenue churn. If your NDR is 110%, your net revenue churn is -10%. An NDR above 100% means expansion covers all losses. Our ARR bridge resource shows how churn fits into the ARR formula. It is the leak you must plug to let the other variables fill the bucket.
CAC payback gets longer as churn rises. When customers leave sooner, your payback period stretches out and the math gets harder. High churn makes unit economics unsustainable. You spend cash to acquire customers who don't stay long enough to pay you back.
Forecasting accuracy relies on stable churn. With strong gross dollar retention, revenue is easier to predict. Our GDR resource explains that if GDR falls, forecasts become uncertain. Churn sets the baseline for your future revenue projections.
Valuation is directly linked to retention. Investors view low churn as a sign of a high-quality product and predictable revenue. Our GDR guide points out that higher GDR leads to stronger valuations.
Benchmarks and rules of thumb
Churn benchmarks vary based on who you sell to (SMB vs. Enterprise) and how you sell (Self-serve vs. Sales-led). Use these to guide your targets.
- Gross revenue churn: Leading SaaS companies with enterprise customers often achieve annual rates of 5-7%. Our GDR resource notes median SaaS gross churn is 9%. The best performers see 5% annual churn or less.
- SMB benchmarks: Companies focused on small businesses naturally see higher churn. Annual gross revenue churn of 10-20% is typical here. Our GDR benchmarks show 10-15% churn is normal for SMBs with an Annual Contract Value (ACV) under $5K.
- Monthly logo churn: Self-serve SaaS usually hovers between 3-7%. Sales-assisted products target 1-2% monthly logo churn. In 2025, the average monthly churn rate is 4.1%, with 3.0% voluntary and 1.1% involuntary churn.
- Logo vs. Revenue discrepancy: Annual logo churn is almost always higher than annual revenue churn. Enterprise companies (1000+ employees) see 13.6% annual logo churn relative to revenue churn, while SMBs (10-99 employees) see 57.8%.
- The Golden Rule: Net revenue churn below zero (NDR above 100%) is the goal. Our NRR guide shows top SaaS companies reach NRR between 115% and 125%.
- Warning signs: If your monthly gross revenue churn is above 2-3%, that is a red flag worth immediate investigation. If GDR falls below 85%, you need to take action on product or customer success immediately.
Common pitfalls in measuring churn
Churn looks simple on the surface. Easy mistakes can throw off your numbers and lead to bad decisions.
- Isolating metrics: Reporting only logo churn hides the financial impact of losing big customers. Always show both logo and revenue churn together to give the full context.
- Hiding losses with expansion: Reporting only net revenue churn without gross revenue churn masks the problem. You might have high churn that is barely covered by aggressive upsells. This is not sustainable.
- Bad math on annualization: Don't annualize monthly churn by just multiplying by 12. You need to compound it. For example, 1% monthly churn is about 11.4% annually, not 12%.
- Including trials: Exclude trial users, free-tier, and non-paying accounts from logo churn calculations. Including them overstates your churn rate and causes panic where none is needed.
- Ignoring seasonality: Some industries have natural churn cycles. Fiscal year-ends often trigger cancellations. Compare year-over-year trends rather than just month-over-month to spot true shifts.
- Lagging mindset: Don't just track the churn after it happens. Track leading indicators like product usage drops, support tickets, or falling NPS. This lets you act before the customer leaves.
- Inconsistent data: Ensure Finance, Product, and Sales all use the same definition of "churn." Disagreements on data definitions waste time in meetings that should be spent on strategy.
How to track churn in Runway
Runway empowers small, scrappy finance teams and model owners to track both logo and revenue churn without needing a massive data engineering project. You get control over your data and the flexibility to simulate scenarios. Here is a checklist you can act on now:
- Connect your data. Integrate Stripe, HubSpot, or wherever your MRR lives using one of our 750+ integrations. Each row represents a customer with a time series of MRR and IDs for segmentation.
- Classify MRR movements. Add columns for new MRR, upgrade MRR, downgrade MRR, and churn MRR. Use
ifformulas to mark lost or changed subscriptions. For churn, check if MRR is 0 this month but was positive last month. - Define your current base. Create a "prior existing MRR" driver that selects active revenue from last month. Use this as your denominator for gross dollar retention and revenue churn calculations.
- Aggregate your numbers. Sum up your prior existing MRR, downgrade MRR, and churn MRR. These tie together for your final calculations.
- Calculate gross metrics. Calculate GDR % by subtracting downgrades and churn from starting MRR, then dividing by starting MRR. Your gross revenue churn is simply 1 minus your GDR.
- Calculate net metrics. Calculate NRR % by taking starting MRR, adding expansion, subtracting contraction and churn, and dividing by the start. Net revenue churn is 1 minus your NRR.
- Track logo churn. Add a column to flag churned customers (count is 1 if they left, 0 if they stayed). Divide the total count of churned customers by the starting customer count to get your logo churn percentage.
- Set your actuals cutoff. Choose your last close date so Runway switches from actuals to forecast. This allows you to see historical churn trends right next to your future retention projections.
- Segment your metrics. Filter churn by type, plan, or region. Zero in on high-churn segments and target your retention efforts where they matter most.
- Build cohort views. Use Runway’s cohort tools to track churn by month or rolling averages. See exactly where churn spikes in the customer lifecycle.
Runway lets you trace every churn metric back to your source data. You can audit your numbers, simulate different scenarios, and collaborate on action plans across the company. Our SaaS revenue forecasting guide walks you through setting up churn assumptions and seeing their impact in your revenue model.
Increase your financial growth with effective churn management
Knowing the difference between logo churn and revenue churn helps you understand customer behavior and financial health. Logo churn tells you if your customer pool is stable. Revenue churn tells you if your revenue base is strong. Tracking both uncovers insights a single metric excludes.
Solid churn tracking drives every key business outcome. It improves lifetime value, net dollar retention, CAC payback, and company valuation. Get churn measurement right and you will forecast better, target your resources effectively, and give investors clear answers every time.
You can take control of your churn metrics with Runway’s flexible modeling platform. Trace every metric, compare scenarios, and plan with your whole team to boost retention and unlock new growth.
Talk with us and move from firefighting to leading your business finances with confidence.