SaaS Churn Rate Benchmarks: What's Actually Normal in 2025
“Is 5% churn bad?”
I get asked this constantly. And the answer is always the same: it depends.
5% monthly churn will kill your business. 5% annual churn means you’re doing better than most. The first is healthy. The second will slowly drain your business.
The problem with churn benchmarks is that everyone throws around numbers without context. “Good SaaS churn is under 5%.” Okay, but 5% of what? Per month? Per year? For enterprise or SMB? B2B or B2C?
This post gives you actual benchmarks with actual context. You’ll know exactly where you stand and whether you should be worried.
Here’s the quick answer if you’re in a hurry:
- B2B SaaS average: 3.5-5% annual churn is solid
- SMB-focused products: 5-7% annual is realistic
- Enterprise SaaS: Under 3% annual is achievable
- Monthly churn: Anything over 2-3% monthly is a problem
Now let’s break down why these numbers vary so much.
Churn Benchmarks by Company Size
Your customers’ size matters more than almost anything else when it comes to churn. Here’s what the data shows:
| Customer Segment | Annual Churn Rate | Why |
|---|---|---|
| Small business | 7.5% | Budget cuts, business failures, price sensitivity |
| Mid-market | 5.2% | More stable, but still shop around |
| Enterprise | 3.8% | Long contracts, high switching costs |
Small business SaaS (7.5% annual): If you’re selling to freelancers, solopreneurs, or small teams, higher churn is baked into the model. These customers have tighter budgets, less stable businesses, and lower switching costs. A 7% annual churn rate isn’t great, but it’s not unusual either.
Mid-market SaaS (5.2% annual): Companies with 50-500 employees stick around longer. They’ve usually done some evaluation before buying, and switching means retraining teams. If you’re in this segment and seeing double-digit churn, something’s wrong.
Enterprise SaaS (3.8% annual): Big companies sign annual or multi-year contracts. They have dedicated teams using your product. Switching is a massive project. If you’re selling enterprise and churning more than 5% annually, you likely have a product or support problem.
The takeaway: compare yourself to companies selling to similar customers, not to SaaS in general.
Churn Benchmarks by Vertical
Some industries just churn more than others. Here’s what 2025 data shows:
| Vertical | Monthly Churn | Notes |
|---|---|---|
| EdTech | ~9-10% | Budget cycles, seasonal usage |
| Healthcare SaaS | ~7.5% | Regulatory changes, long sales cycles |
| HR/Back Office | ~4.8% | Sticky once implemented |
| Collaboration Tools | ~7% | Low switching costs, crowded market |
| Customer Success | ~3.5% | Ironic, but they practice what they preach |
EdTech has it rough. School budgets get cut. Semesters end. Teachers leave. If you’re in EdTech and seeing 8-10% annual churn, you’re actually doing okay. The vertical just has structural challenges.
HR and back-office tools tend to stick. Once a company sets up payroll, HRIS, or expense management, they’re not switching unless something is seriously broken. These tools get embedded into workflows.
Collaboration tools see higher churn. Slack, Notion, and dozens of alternatives. Low switching costs. If one tool gets annoying, teams just move to the next one. This is a tough space for retention.
Stop guessing what to build. Let your users vote.
Try UserJot freeMonthly vs Annual: The Math People Get Wrong
Here’s where founders mess up. They see 1% monthly churn and think “that’s 12% annual.” It’s not. Churn compounds.
The actual math:
Annual churn = 1 - (1 - monthly churn rate)^12So if you have 1% monthly churn:
- Not 12% annual
- Actually 11.4% annual
Doesn’t seem like a big difference? Look at higher numbers:
| Monthly Churn | Naive Calculation | Actual Annual Churn |
|---|---|---|
| 1% | 12% | 11.4% |
| 2% | 24% | 21.5% |
| 3% | 36% | 30.6% |
| 5% | 60% | 46.0% |
At 5% monthly churn, you’re losing almost half your customers every year. That’s not sustainable.
The benchmark to remember: Keep monthly churn under 2%. That gives you roughly 20% annual churn, which is survivable for SMB-focused products. Under 1% monthly (11% annual) is where you want to be for healthy growth.
What Actually Affects Your Churn Rate
Before you panic about your numbers, consider what’s driving them:
Pricing model matters. Monthly billing churns 2-3x more than annual. If you’re monthly-only and comparing yourself to companies with annual contracts, you’re comparing apples to oranges. Consider offering annual discounts to shift your mix.
Customer segment matters. Selling to startups? They fail. That’s not your churn problem, that’s their survival problem. Selling to enterprises? They expect white-glove support and have very different expectations.
Product maturity matters. Early-stage products churn more. You’re still finding product-market fit. You’re missing features competitors have. That’s expected. Don’t compare your Series A churn to Salesforce’s.
Acquisition channel matters. Customers from content marketing and referrals churn less than customers from paid ads. If you just scaled up paid acquisition, expect churn to increase temporarily.
Your actual problem might not be churn. Sometimes high churn is actually a sign you’re acquiring the wrong customers. If you’re bringing in people who were never a good fit, the problem is upstream. Fixing acquisition can fix churn.
What a Good Churn Rate Actually Looks Like
Let me give you specific targets:
If you’re early stage (pre-PMF):
- Monthly churn under 5% is okay
- Focus on learning why people leave, not just reducing the number
- Talk to every churned customer
If you’re SMB-focused:
- Monthly churn under 3% is good
- Annual churn under 7% is solid
- Under 5% annual means you’re doing well
If you’re mid-market or enterprise:
- Monthly churn under 1% is the goal
- Annual churn under 5% is expected
- Net revenue retention over 100% should be the real target
The real metric to watch: As you mature, shift focus from gross churn to net revenue retention (NRR). If your existing customers are expanding faster than others are leaving, you can have “high” logo churn and still grow. Many successful SaaS companies have 5-7% logo churn but 110%+ NRR.
What To Do If Your Churn Is Too High
If you’re above these benchmarks, the fix usually comes down to a few things:
1. Figure out why people are actually leaving. Not your guess. Their words. Send exit surveys. Do churn interviews. Look for patterns. Most founders are surprised by the real reasons.
2. Look at your onboarding. The majority of churn happens in the first 90 days. If customers don’t get value fast, they leave. This is usually the most impactful fix.
3. Build a feedback loop. Customers leave when they think you’re not listening or not building what they need. A public roadmap and feedback board lets them see you’re actively shipping. We’ve seen this reduce churn significantly with UserJot customers.
4. Check your customer fit. Are you selling to the right people? If your best customers look different from your churned customers, tighten your targeting.
5. Consider pricing changes. Sometimes churn is a pricing problem in disguise. Customers at the lowest tier often churn most. Moving them up (with more value) can help.
For a deeper dive on reducing churn, check out our guide on customer retention strategies for B2B SaaS.
Frequently Asked Questions
What is a good churn rate for SaaS?
A good annual churn rate for B2B SaaS is 5-7% for SMB-focused products and under 5% for mid-market or enterprise. For monthly churn, aim for under 2% if you’re SMB-focused and under 1% if you’re selling to larger companies.
What is the average churn rate for SaaS companies?
The average B2B SaaS churn rate is around 3.5-5% annually according to 2025 data. However, this varies significantly by customer segment. Small business-focused SaaS sees around 7.5% annual churn, while enterprise SaaS averages closer to 3.8%.
How do you calculate SaaS churn rate?
Monthly churn rate = (Customers lost during month / Customers at start of month) × 100. To convert to annual, use: Annual churn = 1 - (1 - monthly rate)^12. Don’t just multiply monthly by 12, as churn compounds.
Is 10% churn rate bad?
10% monthly churn is very bad and unsustainable. You’d lose almost 72% of customers annually. 10% annual churn is high but not catastrophic for SMB-focused products, though you should work to reduce it.
Why is my SaaS churn so high?
Common causes include poor onboarding (customers don’t see value fast enough), product-market fit issues, targeting the wrong customers, missing key features, or lack of communication about your roadmap. Exit surveys and churn interviews are the best way to find out.
What’s the difference between gross churn and net churn?
Gross churn measures total revenue or customers lost. Net churn (or net revenue retention) accounts for expansion revenue from existing customers. You can have 5% gross churn but negative net churn if expansions exceed losses.