The SaaS industry is dynamic and competitive, often making it difficult to judge what constitutes a “good” churn rate. That’s where benchmarks come in handy.

Measuring your churn rates against industry benchmarks provides guidance to Customer Success teams at both new and established businesses. At the very least, benchmarking can give CS teams a sense of where they should be aiming. (Hint: lower is better!)

To accurately plot where your churn is, we’ve assembled the latest data on churn rates for B2B SaaS companies in 2024 for you below. How does your company measure up?

Churn Rate Benchmarks for B2B SaaS Companies, Updated Q2 2024

If you haven’t calculated your own churn rate yet, try Vitally’s churn rate calculator to get rid of the guesswork.

What’s the Current State of Churn in 2024?

SaaS churn rates have noticeably increased since the early pandemic era. According to a 2022 KBCM study, the median annual churn rate for SaaS companies in 2020 was approximately 13%, or about 1.1%/month.

But those numbers have since shifted significantly. According to Baremetrics, average monthly churn rates for B2B SaaS companies were hovering around 4.8% at the start of 2021, peaking at an alarming 7.5% in October 2021. Post-COVID spending reductions, along with high interest rates, drove many companies to rethink their expenses, and as a result, 2023 saw particularly high churn rates for SaaS companies across the board.

Both small and large SaaS companies were still seeing monthly churn rates around 3.5% through the first quarter of 2024. To put it plainly, that’s like replacing almost half your customer base each year! Fortunately, churn rates have continued to improve, dropping to around 2.5% in April 2024, suggesting continued recovery in the SaaS industry.

Here's what the churn trend has looked like from January 2021 through April 2024.

‍Paddle’s SaaS Market Report for March 2024 echoes this trend, stating that "churn in March averaged -1.59, down 12% from a year ago and the lowest figure since October 2022, 18 months ago...this points to companies actively combatting churn and looking to drive more revenue from their existing customer base which is significantly cheaper."

While retention and churn have stabilized somewhat in 2024, they continue to remain both stubbornly high and a drain on MRR. 

As we see it, an annual churn rate of about 5% or less will be needed to maintain sustainable growth. This figure seems to be a generally agreed upon benchmark, according to reports from Forbes and Gong. 

As Ryan Law of CoBloom says, “Absolute churn rates aren't as important as changes in churn rates…Though it's hard to give a precise benchmark, the six studies I've analyzed suggest the same thing: a 5% churn rate is pretty common, and as evidenced by the likes of Buffer, Baremetrics, and Convertkit, not a clear-cut barrier to growth.”

Monthly Churn Rate Benchmarks for 2024

Let’s zoom in a bit and look at some recent data on monthly churn. For small to medium-sized SaaS businesses (SMBs), which typically bill monthly, you’ll see a churn rate between 3 and 7%. Businesses that purchase software from SMBs tend to do so in a lower price range, which leads to a lower switching cost based on the subscription model. 

Enterprise markets are a bit more predictable and stable, so an ideal benchmark for monthly churn at the enterprise level should be closer to 1%. Larger companies have more money to spend, but also higher costs associated with switching providers. This leads to less frequent churn.

Churn expert Scott Huruff at Churnkey agrees: “Larger companies have lower churn rates since they’ve had time in the market to establish their clientele. In addition, their clients are usually extended contracts that can’t churn, and what’s more, those clients don’t have the same budget concerns as medium or small ones.”

Primer: What Is Churn Rate?

Churn is one of the primary performance metrics for Customer Success teams at SaaS businesses. Despite being simple to calculate, perhaps no other metric is the subject of so much confusion. Churn rate can apply to revenue — MRR, QRR, or ARR, and Net Dollar Retention — but also Average Revenue Per User, CLV, and CAC.

For most SaaS CS teams, we can simplify churn as the measure of customers or subscribers that have left your service over a given amount of time. 

Fact: Only 1 in 26 unhappy customers complain about a bad experience. The rest simply churn out at the end of their subscription.

What Drives Higher Churn? 

For SaaS companies, that can include:

• Poor customer experience
• Unmet needs and lack of support (account or technical)
• Pricing and perceived value for money
• Dissatisfaction with the product
• Never fully integrating your product with their tech stack
• A better competitive offer

Why Should I Care About Churn?

Plain and simple, churn rate is a snapshot of not only your company’s revenue potential but your brand loyalty. It provides a clear signal that there may be an issue you need to resolve or a service you need to improve. People leave for a reason, and you’ll find it more difficult to retain customers and attract new ones without identifying and solving underlying issues. 

Churn rate, as a metric, is an early warning alarm that something is wrong.

Related: B2B Customer Churn Prevention: 8 Tactics That Actually Work in 2023

The Problem With Comparing Your Churn Rate to Other Businesses' Churn Benchmarks

Before setting goals and building strategy around SaaS churn benchmarks, you should first understand the fundamental challenges in comparing churn across different businesses. To name a few:

• Business Maturity: An established company with a large user base and strong reputation often has lower churn than a less established company and may have a less volatile churn rate over time
• Product, pricing, and customer lifecycle: Some businesses are not optimized for long-term use, such as a job search platform and, accordingly, experience higher churn
• Business Strategy: Rapid growth business with large target market sometimes tend to is likely to attract new subscribers with discounts and offers, fully expecting often have to choose between driving net new users as quickly as possible vs. retention
• Product Elasticity: With some products, it is much easier to regularly switch suppliers in search of the best deal. In sectors where it is harder to change vendors, such as complex technology infrastructure and business-critical systems, businesses often have lower churn.
• Macro influence: Some SaaS businesses are more subject to macroeconomic pressures, new government policies and regulatory forces. For example, a change in law may require a gambling or gaming platform to close underage accounts; or prohibit trade in cryptocurrencies. In such cases, churn will be temporarily high.

Get Your SaaS Company’s Churn Rate Back Under Control

Churn is inevitable. No matter how great your CS team is, or how high-quality the product or service you’re offering is, customers will leave. 

But there are plenty of tactics to try and levers to pull to stop churn before it starts. Lean on technology to alert you when valuable customers are in danger of churning. Automate certain communications and processes in your CS strategy to make each CSM as effective as possible. And build stronger, longer-lasting relationships within each account. 

We’d love to help you do this. Vitally unifies customer data from across your tech stack so you can proactively identify trends and leverage insights for a world-class customer experience. Think customer data, product analytics, support tickets, emails, NPS, and revenue data — all in one platform, all in real-time. 

Think now’s a good time to look into churn reduction and better customer health monitoring? ​​Book your personalized demo of Vitally today, or take a self-guided tour of the Vitally platform whenever you have a few minutes free. Good luck out there!