Churn Is the Silent Killer of SaaS Businesses

Churn, the rate at which customers cancel their subscriptions, is the single most destructive force for a SaaS company. While founders often focus on acquiring new customers, a high Churn rate acts as a leaky bucket that makes sustainable growth impossible.

Why Churn is So Dangerous:

• It Creates a Growth Ceiling: At some point, the Monthly Recurring Revenue you lose from churning customers will equal the new Monthly Recurring Revenue you acquire. At this point, your growth flatlines. You can calculate this Revenue Plateau with a simple formula:
  New Churn Rate = Revenue Plateau
  For example, if you add $5,000 in new Monthly Recurring Revenue each month with a 5% Churn rate, your business will plateau at $100,000 Monthly Recurring Revenue ($5,000 / 0.05).

• It's a Sign of a Deeper Problem: High Churn is a symptom of a fundamental issue. It means you either have not achieved product-market fit, you are attracting the wrong customers, or your onboarding is failing to demonstrate value.

Good vs. Bad Churn Rates (B2B SaaS):

• < 2% monthly revenue Churn: Great
• 2-3%: Good
• 4-5%: Fine
• > 8%: Not Good / Catastrophic

In the very early days (<$10k Monthly Recurring Revenue), the absolute Churn rate is less important than understanding why individual customers are leaving. Use these early cancellations as a learning opportunity to strengthen your product-market fit.

Gaming Churn with dark patterns (e.g., making it hard to cancel) is a mistake. It masks the real problems and damages your brand. The only sustainable way to reduce [[Churn]] is to build a product that customers love and can't live without.

Tags: #SaaS #metrics #churn #retention #product-market-fit #growth