Churn
The rate at which customers cancel their subscriptions or stop paying — the primary measure of retention health for any recurring-revenue business.
Churn (or churn rate) measures how many customers leave over a given period. For a subscription business, churn is the leaking bucket: no matter how many new customers you add, high churn means revenue keeps draining away.
How to calculate monthly churn rate: Divide the number of customers lost in a month by the number at the start. If you start with 100 customers and lose 5, your monthly churn rate is 5%.
What churn rates mean in practice: - 2% monthly churn = ~22% of customers leave per year (healthy for SMB SaaS) - 5% monthly churn = ~46% leave per year (problematic — you're replacing half your customers annually) - 10% monthly churn = ~72% leave per year (business is burning)
Revenue churn vs customer churn: Customer churn counts the number leaving. Revenue churn accounts for the value lost. Losing 3 × $10/mo customers is different from losing 1 × $500/mo customer.
Why churn matters for indie builders: At $100 MRR and 10% monthly churn, you lose $10/mo and must replace it just to stay flat. Reducing churn from 10% to 3% is often more valuable than doubling new customer acquisition.
Example
You run a newsletter tool with 50 paid subscribers at $9/mo ($450 MRR). In January, 4 cancel (8% churn). You add 6 new subscribers. Net: +$18 MRR. If churn were 2%, you'd have kept 3 more subscribers and grown faster with the same acquisition effort.
Related terms
MRR
Monthly Recurring Revenue — the predictable income a business earns every month from active subscriptions or retainer contracts.
SaaS
Software as a Service — software delivered over the internet on a subscription basis, where the provider hosts and maintains the product.
Retainer
A recurring payment arrangement where a client pays a fixed monthly fee for ongoing access to a service or a defined scope of work.