Definition

Churn is the rate at which customers opt out of their recurring revenue subscriptions. SaaS companies use this metric to gauge the rate of cancellations during a period or over a period.

Example

Churn is used:a. To understand Customer Lifecycle Valuations.b. To gauge overall revenue performance and bookings, and estimate cash flows.c. SaaS churn numbers are also focused on by analysts and investors. SaaS businesses may use a variety of churn metrics while highlighting the true performance of the business to stakeholders.

Why it matters

SaaS churn rate is the rate at which a company's customers end existing subscriptions during a period.For any SaaS company to sustain itself, its growth rate (or new customer sign-ups) should be more than its churn rate (customers who cancel).Churn rates provide a reflection of business performance and are often used when forecasting revenue and growth.

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