Enter customers at the start of the month and cancellations to see monthly churn, annualized churn, retention, average customer lifetime, and lifetime value at any ARPU.
Under 3% monthly is strong for SMB SaaS. Above 7% is a buyer red flag — half the customer base rolls over per year even before any pricing pressure.
Churn is the single most important input in SaaS underwriting after MRR. A business with 4% monthly churn loses 39% of its customer base per year; at 8% monthly it loses 63%. If growth doesn't outpace churn, the business is shrinking regardless of what the top-line number looks like this month.
The trap: sellers usually report gross churn (cancellations only). What matters is net revenue retention — cancellations plus downgrades minus upgrades and expansion. A SaaS with 5% gross churn and 3% expansion has 2% net churn, which is a very different business.
Ask for a cohort table before making an offer. Aggregate churn hides the truth: recent cohorts often churn 2–3× faster than older ones, and the trailing 6 months of new customers are what you'll actually inherit.
70%+ margin listings — the profile that can absorb churn and still throw off cash. Ask sellers for their monthly churn cohort before offering.
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Monthly churn = customers lost in a month ÷ customers at the start of the month × 100. Annual churn = 1 − (1 − monthly churn)^12. A 5% monthly churn is a 46% annual churn — not 60%, because you're churning a shrinking base.
For SMB SaaS: 3–5% monthly is normal; under 3% is strong; under 1% is enterprise-tier. Under 2% for prosumer tools is competitive. Anything above 7% monthly is a red flag for buyers — it means half the customer base rolls over every year.
Every 1% monthly churn above 3% typically knocks 0.3× off the fair revenue multiple. A SaaS that would be worth 4× ARR at 3% churn is closer to 3× ARR at 6% churn — the future revenue is worth less because more of it walks out the door.
Customer churn counts cancellations regardless of size. Revenue churn (a.k.a. MRR churn) weights by dollar value — losing one enterprise account hurts revenue churn more than losing ten hobbyists. Buyers care about revenue churn more than logo churn.
Average customer lifetime (months) ≈ 1 ÷ monthly churn rate. 5% monthly churn = 20-month average lifetime. Multiply by ARPU to get lifetime value (LTV).
A high-growth SaaS with 10% churn is on a treadmill — most of the acquisition spend replaces churned customers instead of compounding. Buyers care about net revenue retention: growth minus churn, weighted by dollars.