All terms > Churn
Churn
Churn in business is the loss of a subscription customer due to cancellation or account expiration without payment. There are two types of churn to consider in a SaaS business:
- Unit or customer churn - A percentage of customers that cancel or fail to renew. For example, if you sign up 10 customers in year 1 and only 9 of them renew in year 2, you've got 10% unit churn.
- Revenue or "dollar" churn - A percentage of revenue lost to either cancellation or downgrades. For example, if you sign up 10 customers, each paying $1,000 annually in year 1 ($10,000 ARR total) , and 2 customers downgrade to a $500 annual plan in year 2 ($9,000 ARR total), your revenue churn is 10% because that original cohort is now generating 10% less revenue. However, your unit churn is 0 because you didn't lose any customers.
With revenue churn, it's entirely possible for churn to be negative in the sense that an existing customer cohort pays more in subsequent periods. For more on this concept, see Net Dollar Retention (NDR).
