Churn Rate vs Retention Rate: What Each One Tells You
Churn rate vs retention rate comes down to one difference: churn rate is the percentage of customers or revenue you lost in a period, and retention rate is the percentage you kept. For customers in a single period they are mirror images: 5% churn means 95% retention. They stop being mirror images once you look at revenue, because retention can include upgrades and churn usually does not.
This guide gives the formulas side by side, shows when the two numbers stop adding up to 100%, and suggests which ones a small SaaS should watch. The numbers in the examples are made up to show the math. A note on bias: we make Indiehacker Studio, a tool that does this for small apps; the method below works with any tool or a spreadsheet.
What is the difference between churn rate and retention rate?
| Churn rate | Retention rate | |
|---|---|---|
| Question it answers | How many did we lose? | How many did we keep? |
| Customer version | Churned customers / customers at start | Customers from the start still paying at end / customers at start |
| Revenue version | Churned MRR / MRR at start | MRR at end from starting customers / MRR at start |
| Can it go above 100%? | No (customer), no (gross revenue) | Yes, for net revenue retention |
| Can it go below zero? | Net MRR churn can | No |
| Usual period | Monthly | Monthly or yearly |
Both divide by the value at the start of the period, and both leave new customers out. A customer who signed up this month cannot be retained or churned from a base they were never part of.
Why don’t churn and retention always add up to 100%?
For customer counts in one period, they do: if 200 customers start and 10 leave, churn is 5% and retention is 95%.
They diverge in three situations:
- Revenue with upgrades. Net revenue retention counts expansion. If starting customers paid $1,000 a month, lost $50 to cancellations and added $80 in upgrades, net revenue retention is 1,030 / 1,000 = 103%. Gross MRR churn is still 5%. The two no longer sum to 100%.
- Different periods. Annual retention is not 100% minus monthly churn. Five percent monthly churn leaves about 54% of customers after a year, so annual retention is about 54% and annual churn about 46%.
- Cohorts. Retention is often reported per signup cohort (“of everyone who joined in March, 70% still pay”), while churn is reported per calendar month across everyone. Same business, different lenses.
What are gross and net revenue retention?
These are the retention numbers investors ask about:
- Gross revenue retention (GRR): starting MRR minus churn and contraction, divided by starting MRR. It ignores upgrades, so it can never exceed 100%.
- Net revenue retention (NRR): the same, plus expansion. It can exceed 100%.
For reference, SaaS Capital’s 2025 survey of private B2B SaaS companies found median gross revenue retention of about 91% for companies with contracts under $250K and about 95% above that (SaaS Capital). Those are yearly figures for B2B companies. For monthly churn by price point, our SaaS churn rate benchmarks use ChartMogul’s data.
Can you show churn and retention from the same month?
Here is a made-up example month:
| Item | Value |
|---|---|
| Customers on the 1st | 150 |
| MRR on the 1st | $3,000 |
| Customers who cancelled | 9 (worth $150 MRR) |
| Downgrades from staying customers | $30 |
| Upgrades from staying customers | $90 |
- Customer churn: 9 / 150 = 6.0%
- Customer retention: 141 / 150 = 94.0%
- Gross MRR churn: (150 + 30) / 3,000 = 6.0%
- Gross revenue retention: (3,000 − 150 − 30) / 3,000 = 94.0%
- Net revenue retention: (3,000 − 150 − 30 + 90) / 3,000 = 97.0%
Customer churn and customer retention mirror each other. Net revenue retention tells a better story than gross because of the $90 in upgrades. If you want more worked cases, see the churn rate calculator examples.
Which one should a small SaaS track?
For a product with tens or hundreds of customers on monthly plans, track:
- Monthly customer churn, because it tells you how many people leave and is easy to act on.
- Monthly revenue churn, because it tells you whether the people leaving are your small or big accounts.
- Trial conversion, separately, because expired trials are not churn.
Add net revenue retention once you have plan upgrades, seats or usage that can grow. Before that, it will mostly equal gross retention and add nothing. The churn rate formula guide has the counting rules, and the SaaS metrics worth tracking puts both numbers next to MRR, ARPU and trials.
How do you improve both numbers?
Churn and retention move together, so the levers are the same:
- Fix the first week. In our view, early cancellations often come from customers who never got set up. Watching which pages new users visit (website visitor tracking) shows where they stall.
- Be easy to reach. A chat on your website catches the “I can’t figure out X” moment before it becomes a cancellation.
- Collect bug reports with context. A bug reporting tool with screenshots fixes problems faster than an email thread.
- Offer upgrades worth paying for. Expansion is what lifts net retention above 100%.
FAQ
Is retention rate just 100% minus churn rate?
For customer counts in a single period, yes. For revenue with upgrades, or across different periods, no.
Which is better to report to investors?
Investor benchmarks such as SaaS Capital’s report gross and net revenue retention, yearly. Founders running the product day to day get more from monthly customer and revenue churn.
Should trials count in retention?
No. Measure trial conversion on its own.
What is a good net revenue retention?
Above 100% means existing customers grow faster than they leave. SaaS Capital’s 2025 data puts the median at 102% for private B2B companies with $25K to $50K contracts (SaaS Capital); an app with no upgrades cannot go above 100%.
See churn next to what caused it
Indiehacker Studio reads your Stripe subscriptions with a read-only restricted key, keeps a daily snapshot per project, and shows customer churn, revenue churn and the new, expansion and contraction MRR behind them over the last 30 days. Next to it you get the analytics, chat and bug reports from the same script, so you can see why a number moved, not only that it did. It does not show net revenue retention as a single number yet; the expansion and contraction figures give you what you need to work it out.
Revenue is a Pro feature at $12 a month or $120 a year. See pricing or create a free account.