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What is the difference between churn rate and retention rate?
Churn rate is the percentage of customers or revenue LOST in a period; retention rate is the percentage KEPT. For simple logo counts they are exact complements (retention = 100% − churn). For revenue they are NOT: expansion from existing customers can push net revenue retention above 100% while gross logo churn stays positive.
The full answer
The complement that is not always a complement
For a simple customer (logo) count, churn and retention are two sides of one coin. Start a month with 100 customers, lose 5, and your customer churn is 5% while your customer retention is 95% — they sum to 100%. The moment you measure REVENUE instead of logos, that clean complement breaks, because existing customers can spend more (expansion) or less (contraction), not just stay or leave.
Side-by-side comparison
| Property | Churn rate | Retention rate |
|---|---|---|
| Measures | Customers/revenue lost | Customers/revenue kept |
| Direction | Lower is better | Higher is better |
| Logo-level relationship | Retention = 100% − churn | Churn = 100% − retention |
| Revenue-level relationship | NOT a simple complement (expansion breaks it) | Net retention can exceed 100% |
| Common ceiling | 0% (perfect) | 100% logo / >100% net revenue |
| Best for | Spotting leakage, cohort decay | Spotting durability, expansion engine |
| Investor headline | Gross churn (risk) | Net Revenue Retention (growth quality) |
Customer churn vs revenue churn
- Customer (logo) churn: customers_lost ÷ customers_at_start. Counts heads.
- Revenue churn: MRR_lost ÷ MRR_at_start. Counts dollars. A single enterprise account leaving can be 0.5% logo churn but 15% revenue churn — same event, wildly different magnitude depending on which lens you use.
Gross vs net (the distinction that matters most)
- Gross Revenue Retention (GRR): (starting MRR − churn − contraction) ÷ starting MRR. It CAPS at 100% because it ignores expansion. A pure measure of how much of the existing base you keep.
- Net Revenue Retention (NRR): (starting MRR − churn − contraction + expansion) ÷ starting MRR. It can EXCEED 100%. A best-in-class SaaS company can post 120% NRR (the existing base grows 20%) while still losing 8% of its logos to churn. Both numbers are true at the same time.
Why NRR above 100% is the holy grail
If NRR exceeds 100%, the company grows revenue even if it acquires zero new customers — the existing book expands faster than it leaks. Top public SaaS companies have reported NRR of 130%+. This is why investors quote NRR, not churn alone: churn tells you the size of the leak; NRR tells you whether the bucket fills faster than it drains.
Benchmarks (directional, not advice)
- SMB SaaS: 3-5% monthly logo churn is common; NRR 90-100%
- Mid-market: 1-2% monthly churn; NRR 100-110%
- Enterprise: under 1% monthly churn; NRR 110-130%+
The annualization trap
5% monthly churn does NOT equal 60% annual churn. Churn compounds on a SHRINKING base: (1 − 0.05)^12 ≈ 0.54, so annual retention is ~54% and annual churn ~46% — not 60%. Multiplying monthly churn by 12 always overstates the loss.
Cross-reference: see /pages/what-is/churn-rate + /pages/what-is/lifetime-value + /pages/what-is-the-difference-between/mrr-and-arr.
Time ranges by condition
| Condition | Duration | Note |
|---|---|---|
| Logo-level complement | retention = 100% − churn (always) | — |
| GRR ceiling | 100% (cannot exceed — ignores expansion) | — |
| NRR ceiling | unbounded (best-in-class 120-130%+) | — |
| 5% monthly churn annualized | ~46% (compounded, NOT 60%) | — |
| Enterprise best-practice monthly churn | under 1% | — |
What changes the time
- Measurement unit. Logos make churn and retention exact complements; revenue does not (expansion + contraction)
- Expansion revenue. When present, NRR can exceed 100% even while gross logo churn stays positive
- Customer segment. SMB churns faster (3-5%/mo) than enterprise (under 1%/mo)
- Time window + compounding. Monthly churn compounds on a shrinking base — never multiply by 12
Common questions
Is churn rate just 100% minus retention rate?
Only for simple LOGO counts. For revenue, no: expansion from existing customers means Net Revenue Retention can exceed 100% while gross logo churn is still positive. A company can lose 8% of logos (8% churn) yet post 120% NRR because the remaining customers expanded. Always specify whether you mean logo or revenue, gross or net.
What is the difference between gross and net retention?
Gross Revenue Retention (GRR) counts only what you KEEP from the starting base — it caps at 100% and ignores expansion. Net Revenue Retention (NRR) adds expansion revenue, so it can exceed 100%. GRR shows how leaky the bucket is; NRR shows whether expansion outpaces the leak. Investors quote both: GRR for risk, NRR for growth quality.
Why does 5% monthly churn not equal 60% annual churn?
Because churn compounds on a SHRINKING base, not a fixed one. Each month you lose 5% of whoever is left, not 5% of the original cohort. (1 − 0.05)^12 ≈ 0.54, so about 54% are retained and 46% churned annually — not 60%. Multiplying monthly churn by 12 always overstates the annual loss.
Should I track customer churn or revenue churn?
Track both. Customer (logo) churn shows how many relationships you are losing; revenue churn shows the financial impact, which can differ wildly when customers vary in size. A SaaS with a few large enterprise accounts cares most about revenue churn (one logo = big dollars); a high-volume consumer app watches logo churn (each customer ≈ same value).
Sources
We cite primary research, expert practice, and authoritative reference. Higher-tier sources weighted heavier. See methodology.
- T2David Skok, "SaaS Metrics 2.0" — Canonical churn/retention definitions + the "negative churn" concept
- T1Bessemer Venture Partners "State of the Cloud" — Net Revenue Retention benchmarks for public SaaS companies
- T2ChartMogul SaaS Metrics Guide — GRR vs NRR calculation + edge cases (contraction, mid-period upgrades)
- T3Lincoln Murphy, Customer Success (Sixteen Ventures) — Logo vs revenue retention; net negative churn for customer-success teams
- T2Paddle / ProfitWell retention research — Monthly + annual churn benchmarks segmented by SMB / mid-market / enterprise
Cite this page
de Vries, P. (2026). What is the difference between churn rate and retention rate?. AskedWell. Retrieved 2026-05-29, from https://askedwell.com/pages/what-is-the-difference-between/churn-rate-vs-retention-rate
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