SaaS Churn Rate in 2026: Benchmarks, Averages, and How to Improve Yours

The average SaaS company loses between 3% and 8% of its customers every single month. Over a year, that compounding loss can silently drain 30-60% of your revenue base. If you're not tracking your SaaS churn rate closely, you're flying blind.

But here's the thing: "good" churn varies wildly depending on your company size, pricing model, industry, and whether you sell to consumers or businesses. A 5% monthly churn rate might be catastrophic for an enterprise product and perfectly acceptable for a low-cost B2C tool.

In this guide, we break down the latest SaaS churn rate benchmarks for 2026, covering averages by company size, ARR stage, industry vertical, and pricing tier. You'll also learn how churn rate relates to retention rate, what involuntary churn is costing you, and actionable strategies to bring your numbers down.

At MRRSaver, we help SaaS founders recover failed payments and prevent cancellations on autopilot. We've seen firsthand how understanding your churn benchmarks is the first step toward actually improving them.

What Is SaaS Churn Rate?

SaaS churn rate measures the percentage of customers or recurring revenue lost within a specific period, typically a month or a year. It's one of the most critical metrics for any subscription business because it directly impacts your growth trajectory, customer lifetime value (LTV), and ability to sustain profitability.

There are two primary types of churn in SaaS that you need to track separately:

• Customer churn tracks the number of customers who cancel, regardless of how much they paid. If you lose 10 out of 200 customers in a month, your customer churn rate is 5%.
• Revenue churn considers the dollar value of lost customers. Losing one enterprise customer paying $5,000/month is far more damaging than losing five customers on a $29/month plan. Revenue churn is often a more telling metric for SaaS businesses with variable pricing.

You also need to understand the difference between voluntary and involuntary churn. Voluntary churn happens when a customer actively decides to cancel. Involuntary churn happens when a payment fails and the subscription lapses without the customer intending to leave. Nearly half of all subscription churn is involuntary, which makes it the most fixable type of churn in SaaS.

How to Calculate SaaS Churn Rate

The basic customer churn rate formula is straightforward:

Customer Churn Rate = (Customers Lost During Period / Customers at Start of Period) x 100

For example, if you start the month with 500 customers and lose 15, your monthly churn rate is 3% (15 / 500 x 100). Only count existing customers who cancel. New customers acquired during the period should not factor into this calculation.

For revenue churn, the formula shifts to focus on MRR:

Revenue Churn Rate = (MRR Lost from Cancellations + MRR Lost from Downgrades) / Starting MRR x 100

Converting Monthly Churn to Annual Churn

A common mistake is multiplying monthly churn by 12 to get annual churn. This ignores compounding. The correct formula is:

Annual Churn Rate = 1 - (1 - Monthly Churn Rate)^12

This matters more than you might think. A 5% monthly churn rate does not equal 60% annual churn. It actually compounds to roughly 46% annual churn. At 3% monthly, you're looking at about 31% annual churn. The compounding effect means that even small improvements in monthly churn have an outsized impact on annual retention.

Churn Rate vs Retention Rate: What's the Difference?

Churn rate and retention rate are two sides of the same coin. Your churn rate measures how many customers you lost. Your customer retention rate measures how many stuck around. The simple relationship is:

Retention Rate = 100% - Churn Rate

If your monthly churn rate is 3%, your monthly retention rate is 97%. Both metrics give insights into customer satisfaction, but they frame the conversation differently. Churn rate puts the spotlight on what you're losing. Retention rate focuses on what you're keeping.

For SaaS companies, revenue retention is even more nuanced because of expansion revenue. Your SaaS retention rate might be 95% on a customer basis, but your net revenue retention could be 110% if existing customers are upgrading and expanding their usage. That's why the best SaaS companies track both customer churn and revenue retention separately.

SaaS Churn Rate Benchmarks for 2026

Your SaaS churn rate benchmark depends heavily on who you sell to, how much you charge, and what stage your company is at. Here's a breakdown of the latest data.

What Is the Average Churn Rate for SaaS?

According to the 2025 Recurly Churn Report, the average B2B SaaS churn rate is approximately 3.5% annually, with voluntary churn at 2.6% and involuntary churn at 0.8%. However, the average churn rate for subscription services more broadly ranges from 10% to 20% annually, depending on customer segment and pricing model.

The wide range exists because the average saas churn number blends together enterprise companies with 1% annual churn and SMB-focused startups with 7% monthly churn. That's why segment-specific benchmarks matter far more than any single average.

Churn Rate by Company Size

Company size is one of the strongest predictors of churn in SaaS. The pattern is consistent: the larger and more established the company, the lower the churn.

SMB SaaS (targeting small businesses):

• Monthly churn: 3-7%
• Annual churn: 31-58%
• Higher churn due to shorter contract terms, lower switching costs, and smaller budgets

Mid-Market SaaS:

• Monthly churn: 1-3%
• Annual churn: 11-22%
• More integration depth and multi-user adoption reduce churn

Enterprise SaaS:

• Monthly churn: 0.5-1%
• Annual churn: 6-10%
• Long contracts, deep integrations, and multiple stakeholders create high switching costs

One interesting data point: software purchased by C-suite executives churns 3.6x slower than tools bought by individual contributors or managers. The higher the decision-maker, the stickier the product tends to be.

Churn Rate by ARR Stage

Your churn rate saas benchmark also depends heavily on your company's revenue stage. Early-stage companies naturally experience higher churn as they refine product-market fit:

• Early-stage (<$300K ARR): 6.5% monthly customer churn. This is normal and expected. You're still learning who your ideal customer is.
• Growth stage ($1M-$3M ARR): 3.7% monthly customer churn. Product-market fit is improving but retention still has room to grow.
• Scale stage ($8M+ ARR): 3.1% monthly customer churn. Systems, processes, and customer success teams are in place.
• Large scale ($15M+ ARR): 1.8% net MRR churn. At this stage, many companies achieve near-zero or negative net churn through expansion revenue.

Churn Rate by Industry Vertical

Not all SaaS verticals are created equal. Infrastructure and back-office tools enjoy the lowest churn because they become deeply embedded in workflows. Marketing and sales tools, where competition is fierce and switching is easy, see much higher rates.

• Infrastructure SaaS: 1.8% monthly churn (lowest, due to high switching costs)
• HR and Back Office: 4.8% monthly churn (sticky after integration)
• Marketing and Sales Tools: 4.8-8.1% monthly churn (high competition, easy to switch)
• Healthcare SaaS: 7.5% monthly churn (saw a 67% spike in revenue churn from 2024 to 2025)
• EdTech: 9.6% monthly churn (highest, doubled from 2024 levels)

B2B vs B2C SaaS Churn Rates

B2B SaaS consistently outperforms B2C on retention. The average B2B voluntary churn rate is 3.50%, while B2C comes in at 4.04%. But the gap widens significantly when you include involuntary churn. Consumer-facing SaaS, especially in digital media, retail, and education, often experiences total churn in the 6.5-8% range monthly.

The reason is structural. B2B relationships involve multiple teams, approval chains, and decision-makers. Canceling isn't usually up to a single individual. B2C subscriptions, on the other hand, can be canceled with a single tap in an app store. Lower switching costs, higher price sensitivity, and more emotional purchase decisions all contribute to higher churn saas rates on the consumer side.

Churn Rate by ARPU and Pricing Tier

Pricing is one of the strongest predictors of churn. The relationship is clear: the more a customer pays, the less likely they are to leave.

• Low-cost products (<$25 ARPU): 6.1% monthly churn
• Mid-range products ($50-$249 ARPU): 2-4% monthly churn
• High-value products (>$1,000 ARPU): 1.8% monthly churn

This isn't just about ability to pay. Higher-priced products tend to be more deeply integrated into workflows, have dedicated onboarding, and come with customer success support. All of these reduce churn naturally.

SaaS Retention Rate Benchmarks

While churn rate tells you what you're losing, saas retention rates tell the full picture when you factor in expansion revenue. There are two key retention metrics every SaaS company should track.

Gross Revenue Retention (GRR)

GRR measures the percentage of recurring revenue retained from existing customers, excluding any expansion. It can never exceed 100%. For B2B SaaS, a median GRR of 82% is typical. Best-in-class companies maintain GRR above 90%. GRR is the purest measure of your product's core value because it strips out the effect of upselling.

Net Revenue Retention (NRR)

NRR includes expansion revenue from upgrades, seat additions, and cross-sells. The average saas retention rate for NRR ranges from 85% to 135%, with best-in-class B2B SaaS companies achieving 110-125%. When NRR exceeds 100%, you have negative churn, meaning your existing customers generate more revenue over time even without acquiring anyone new.

About 40% of SaaS businesses in the $15-30M ARR range have achieved negative churn. The key is building a pricing model with a natural expansion loop, like usage-based pricing or per-seat billing that scales with the customer's growth.

The saas retention rate calculation for NRR is: (Starting MRR + Expansion MRR - Churned MRR - Contraction MRR) / Starting MRR x 100. Tracking saas retention benchmarks alongside churn gives you a complete view of customer health.

What Churn Actually Costs You: The Compounding Effect

Most founders underestimate the true cost of churn because they think in linear terms. But churn compounds. Let's look at a concrete example.

Imagine a SaaS company with $100,000 in MRR. Here's what different monthly churn rates do to that revenue over 12 months, assuming no new customer acquisition:

• 3% monthly churn: MRR drops to $69,384 after 12 months. You lose $30,616 in annual recurring revenue.
• 5% monthly churn: MRR drops to $54,036. You lose nearly half your revenue base. That's $45,964 gone.
• 8% monthly churn: MRR drops to $36,770. You've lost over $63,000, or nearly two-thirds of your starting revenue.

The difference between 3% and 5% monthly churn is not a minor gap. It's the difference between retaining $69K and retaining $54K of your starting MRR. And churn also devastates your customer lifetime value. At 2% monthly churn, the average customer lifetime is 50 months. At 5% monthly churn, it drops to just 20 months. That means you have less than half the time to recoup your acquisition cost.

The Hidden Churn Problem: Failed Payments and Involuntary Churn

Here's a statistic that surprises most SaaS founders: up to 48% of all churn is involuntary. These are customers who didn't choose to leave. Their credit card expired, their bank flagged a transaction, or a temporary hold caused a payment failure. The subscription lapsed, and the customer was lost even though they were happy with the product.

On average, SaaS companies lose about 9% of their MRR to involuntary churn. That's revenue walking out the door because of billing mechanics, not product dissatisfaction. And Stripe's default retry logic only recovers a fraction of these failures.

The good news: involuntary churn is the most fixable type of churn. With proper dunning management, including smart payment retries, pre-dunning communications, and automated card update services, companies routinely recover 50-80% of failed payments. One documented case reduced involuntary churn from 12% to just 2% in three months, recovering over $50,000 in ARR.

When building MRRSaver, we focused on this problem first because the ROI is immediate and measurable. You don't need to redesign your product or overhaul your onboarding. You just need to recover the payments that are already failing.

How AI Is Reshaping SaaS Churn in 2026

The rise of AI-native SaaS products has introduced a new churn dynamic in 2026. According to ChartMogul's SaaS Retention Report, AI-native companies show dramatically different retention profiles compared to traditional SaaS.

• AI-native overall: 40% gross revenue retention, 48% net revenue retention. Far worse than the B2B SaaS median of 82% NRR.
• Premium AI tools (>$250/month): 70% GRR, 85% NRR. These numbers match traditional B2B SaaS, proving that pricing and commitment level matter.
• Budget AI tools (<$50/month): 23% GRR, 32% NRR. The "AI tourist" effect, where users sign up out of curiosity and quickly churn, hits this segment hardest.

There's a silver lining: median GRR for AI-native SaaS jumped from 27% in January 2025 to 40% by September 2025, suggesting that as "AI tourists" churn out, the remaining customer base is becoming more committed and retention is stabilizing.

For traditional SaaS companies, the AI wave creates a secondary churn pressure: budget reallocation. Every dollar an enterprise spends on AI infrastructure is a dollar not going to another SaaS seat or module. If your product isn't delivering clear, measurable ROI, you're at risk of being cut in the next budget review.

7 Proven SaaS Retention Strategies to Reduce Churn

Understanding your saas churn rate benchmark is step one. Reducing it is step two. Here are the saas retention strategies that consistently move the needle, ordered by typical ROI.

1. Fix Involuntary Churn First

Automated payment recovery through smart retries and dunning emails is the highest-ROI churn fix available. It requires zero product changes and can recover 50-80% of failed payments. Tools like MRRSaver handle this on autopilot, connecting directly to Stripe and running intelligent retry sequences the moment a payment fails.

2. Implement Smart Cancel Flows

When a customer clicks "cancel," you have one last chance to save them. Smart cancel flows present targeted offers based on the cancellation reason: a discount for price-sensitive users, a pause option for those taking a break, or a plan change for those who've outgrown their current tier. Well-designed cancel flows save 10-30% of customers who initiate cancellation.

3. Improve Onboarding

The first 30-90 days are make-or-break for saas customer retention rates. Customers who don't reach their first "aha moment" quickly are far more likely to churn. Focus on reducing time-to-value: get new users to their first success as fast as possible through guided setup, proactive check-ins, and milestone-based triggers.

4. Use Cohort Analysis to Find Real Patterns

Your average churn rate hides important details. Cohort analysis groups customers by signup date, acquisition channel, or behavior to reveal when and why different segments churn. You might discover that customers from a specific marketing campaign churn 3x faster, or that users who complete onboarding within 48 hours have 80% better retention.

5. Move Upmarket and Increase ARPU

As we saw in the benchmarks, higher-ARPU customers churn significantly less. Moving upmarket, whether through premium features, higher pricing tiers, or targeting larger companies, naturally improves your churn rate. Products with >$1,000 ARPU see 1.8% monthly churn compared to 6.1% for products under $25.

6. Shift to Annual Contracts

Data shows 8.5% annual churn for annual contracts versus 16% for month-to-month billing. Annual contracts reduce churn by creating commitment, eliminating monthly decision points, and giving customers more time to see value. Offering a meaningful discount (typically 15-20%) for annual billing is one of the simplest retention strategies available.

7. Build Expansion Revenue for Negative Churn

The ultimate goal is negative net churn, where expansion revenue from existing customers exceeds losses from cancellations and downgrades. This requires a pricing model with a natural expansion loop: usage-based pricing, per-seat billing, or tiered plans that customers graduate into as they grow. Best-in-class companies achieve 110-125% NRR through this approach.

Protect Your SaaS Churn Rate Starting Today

Your SaaS churn rate is the single most important metric for long-term business health. A 1% improvement in monthly churn can mean tens of thousands of dollars in retained MRR over a year. The benchmarks in this guide give you a clear target: below 1% monthly for enterprise, below 3% for mid-market, and below 5% for SMB-focused products.

The fastest win is usually fixing involuntary churn. Nearly half of all churn comes from failed payments that can be recovered automatically. You don't need a new product strategy or a larger customer success team. You just need to stop the revenue leak.

Ready to see how much MRR you can recover? MRRSaver connects to Stripe in one click and starts recovering failed payments on autopilot. Try it free for 7 days.