What is Churn Rate?
Churn rate measures how fast you're losing customers (or revenue). For subscription businesses, there are two distinct types:
- Customer churn: percentage of customers who cancel
- Revenue churn (MRR churn): percentage of MRR lost to cancellations
They're related but not the same. You can have low customer churn but high revenue churn if your highest-paying customers leave.
How to Calculate Churn Rate
Customer churn rate:
Churn Rate = (Customers lost in period / Customers at start of period) × 100
MRR churn rate:
MRR Churn Rate = (MRR lost to cancellations / MRR at start of period) × 100
Example: You start the month with 100 customers at $50/month average. 5 cancel.
Customer churn = 5/100 = 5%
MRR churn = $250/$5,000 = 5%
But if those 5 cancellations were all your $200/month enterprise customers:
MRR churn = $1,000/$5,000 = 20% ← much worse
Why Churn Compounds Into Catastrophe
This is the part most early-stage builders underestimate. Churn doesn't just reduce revenue this month — it limits how high you can ever grow.
At 5% monthly churn, your business is losing 46% of its customer base per year. Meaning you need to replace nearly half your customers just to stay flat. You're essentially running on a treadmill.
| Monthly Churn | Annual Customer Loss | Can you grow? | |---------------|---------------------|---------------| | 1% | ~11% | Yes — normal growth possible | | 2% | ~21% | Challenging — need aggressive acquisition | | 5% | ~46% | Very hard — acquisition costs kill margins | | 10% | ~72% | Near impossible to grow sustainably |
Healthy Churn Benchmarks for Indie Hackers
Good churn varies dramatically by price point and market:
- Consumer SaaS (< $20/mo): 3–5% monthly is considered acceptable
- SMB SaaS ($20–$200/mo): 1–3% monthly
- Mid-market ($200–$1,000/mo): 0.5–1% monthly
- Enterprise (> $1,000/mo): < 0.5% monthly (often measured annually)
Most indie hackers building B2C or low-price tools will see higher churn than B2B. That's normal — the key is whether your acquisition keeps pace.
Gross Churn vs Net Churn
Gross churn only counts losses. Net churn subtracts expansion revenue (upsells, seat additions) from the same period.
A SaaS with 5% gross churn but 6% expansion revenue has -1% net churn — meaning existing customers are collectively paying MORE each month despite some cancelling. This is the "holy grail" state known as negative churn.
See Net Revenue Retention for the full picture.
How Makerfolio Displays Churn
Makerfolio's analytics dashboard shows your MRR movement broken down by new MRR, expansion MRR, contraction MRR, and churned MRR — giving you a clean waterfall view of where revenue is being lost and gained each month.