Why Both Logo Churn and Revenue Churn Matter for SaaS Growth

What Are Logo Churn and Revenue Churn?

For an early-stage SaaS founder, few things are as immediate as the numbers from your billing system. You are staring at a Stripe export in a spreadsheet, trying to translate customer names and MRR figures into an answer for the most important question: how fast are you burning through runway? The terms logo churn and revenue churn get thrown around, but they often feel like abstract SaaS growth metrics. However, understanding the difference between logo churn and revenue churn is fundamental to making sound decisions about your product, pricing, and go-to-market strategy.

Misinterpreting these numbers can lead you to build the wrong features or cut prices, burning cash on problems you do not actually have. This distinction is the key to telling an accurate story about your business’s health to yourself, your team, and your investors. At its core, churn tells two different but related stories about customer retention. Grasping both is essential for any subscription business.

Logo Churn: This measures the rate at which you lose customers, or “logos.” It’s a simple count of how many accounts canceled their subscriptions in a given period. It tells you a story about who is leaving.

Logo Churn = (Customers Lost in Period / Total Customers at Start of Period) * 100

Revenue Churn: This measures the rate at which you lose monthly recurring revenue. This tells you the financial impact of what is leaving. It gets slightly more complex because it comes in two important flavors:

• Gross Revenue Churn: This is the total MRR lost from customers who cancel or downgrade their plans. It is a pure measure of revenue leakage from your existing customer base.
• Net Revenue Churn: This is your Gross Revenue Churn minus any new expansion revenue (MRR from upgrades, add-ons, or cross-sells) from your existing customers. If expansion revenue is greater than lost revenue, you achieve Net Negative Revenue Churn, the gold standard for SaaS growth.

Interpreting the Difference Between Logo Churn and Revenue Churn

A scenario we repeatedly see is founders struggling to explain why their logo and revenue churn figures look so different. This divergence is not a sign of bad data; it is a critical insight into the health of your customer base. The difference between losing customers and losing revenue reveals who your product is truly working for. Let’s consider a hypothetical SaaS company with 100 customers and $50,000 in MRR at the start of the month.

Scenario 1: High Logo Churn, Low Revenue Churn

In this situation, the company loses 10 customers. However, all 10 are small accounts paying just $50 per month. Let's look at the numbers:

• Logo Churn: (10 lost customers / 100 total customers) * 100 = 10%
• Revenue Churn: ($500 lost MRR / $50,000 total MRR) * 100 = 1%

This high logo churn might look alarming at first glance, but the low revenue churn tells a positive story. It suggests the product is successfully retaining its higher-value customers. The churn is concentrated among smaller accounts that may not fit your Ideal Customer Profile (ICP). While not ideal, this is a much healthier situation than the alternative. The key here is that user churn analysis is not just about the count of users, but their value.

Scenario 2: Low Logo Churn, High Revenue Churn

Here, the company loses only two customers. But both are large enterprise accounts paying $5,000 per month each. The calculation reveals a serious problem:

• Logo Churn: (2 lost customers / 100 total customers) * 100 = 2%
• Revenue Churn: ($10,000 lost MRR / $50,000 total MRR) * 100 = 20%

This is a five-alarm fire. The low logo churn masks a critical issue: the product is failing its most important customers. This significant monthly recurring revenue loss signals a potential mismatch between your product’s capabilities and the needs of your target market, or perhaps a major competitive threat. Misreading this could be catastrophic for the business.

A Practical Guide to Churn Rate Calculation

One of the most common pain points for founders is that incomplete or messy billing data makes it hard to calculate these metrics accurately. The reality for most Pre-Seed to Series B startups is more pragmatic. You are likely working with Stripe exports and spreadsheets, not a dedicated CFO with a suite of enterprise tools. The goal is not perfect accounting precision; it’s directional accuracy that you can use to make better decisions.

Do not let the quest for perfection stop you from getting a good enough number. A simple, repeatable process is what founders find actually works.

1. Export Your Data: Pull your subscription data from Stripe, Chargebee, or whatever system you use. You need a list of all active subscriptions at the start of the period (e.g., May 1st) and at the end (e.g., May 31st), including a unique customer ID and the MRR for each. If you use Stripe, see Stripe's guide to accessing subscription data.
2. Set Up Your Spreadsheet: Create a simple table with columns for Customer ID, Start of Period MRR, and End of Period MRR. For a customer who signed up mid-month, their Start MRR is $0. For a customer who churned, their End MRR will be $0.
3. Calculate Logo Churn: Count the number of customers who had a Start of Period MRR greater than $0 and an End of Period MRR of $0. Divide this count by the total number of customers who had a Start of Period MRR greater than $0. This is your logo churn rate.
4. Calculate Gross Revenue Churn: Sum the Start of Period MRR for all customers who churned (their End MRR is $0). Next, identify customers who downgraded by finding those where End MRR is less than Start MRR. Add that revenue difference to your churned MRR. This total is your gross revenue churn.
5. Calculate Net Revenue Churn: First, find your expansion MRR by identifying customers where End MRR is greater than Start MRR. Sum that positive difference. Now, apply this formula: (Gross Revenue Churn - Expansion MRR) / Total Start of Period MRR. This is your net revenue churn. For a formal overview, see this NRR calculation guide.

This manual process is manageable in the early days. As you scale, tools like ChartMogul or Baremetrics can automate this, but understanding the underlying mechanics in a spreadsheet first is invaluable.

How to Act on Your Customer Retention Metrics

Once you have a directionally accurate view of logo and revenue churn, the real work begins. The numbers themselves are not the answer; they are the starting point for asking better questions. Instead of just reporting the churn rate, you need to dig into the why behind it. Your first job is to segment. A single churn number for your whole business is a vanity metric. You must break it down by customer size, plan type, acquisition channel, or any other meaningful dimension to uncover the real story.

If You See High Logo Churn but Low Revenue Churn

This scenario prompts important questions about your customer acquisition and onboarding. Are you losing non-ICP customers who were never a good fit? Is your onboarding process failing smaller, self-serve users who need more guidance? This is often a signal to refine marketing and sales efforts to target customers who look like your high-value, low-churn accounts. It might also mean investing in better self-serve documentation or automated onboarding flows to reduce friction for smaller clients, potentially reducing churn in SaaS for that segment.

If You See Low Logo Churn but High Revenue Churn

This situation requires immediate, direct intervention. You must investigate why your most valuable accounts are leaving. Is there a critical feature missing from your product? Did a competitor poach them with a better offer? Was there a major customer support failure? You should be conducting detailed exit interviews with every high-value customer who leaves. The feedback from these accounts should be treated as a top priority for your product and customer success teams. This is a clear signal of where the biggest risks to your business lie.

How to Explain Churn Metrics to Investors

Struggling to explain the divergence between logo and revenue churn erodes credibility in investor or board meetings. Presenting these metrics effectively is not about showing a single perfect number. It is about demonstrating that you understand the levers of your business. To do this, you must frame the metrics as a narrative that connects the data to your strategy.

Weak Story: “Our logo churn was 5% this month, and our net revenue churn was 1%.”

Strong Story: “We had 5% logo churn this month, driven almost entirely by smaller, self-serve customers who signed up but did not fully activate. However, our net revenue churn was actually negative 2%. This shows that once a customer is properly onboarded and fits our ICP, they not only stay but expand their usage significantly. Our strategy for the next quarter is to focus on improving self-serve activation to reduce early-stage churn and double down on our land-and-expand motion with mid-market accounts.”

The second approach shows you are in control. It proves you are using customer retention metrics to guide your strategy, not just report on the past. Communicating this story can be made even more powerful by showing a chart that segments churn by customer size, immediately illustrating that you are successfully retaining and growing the accounts that matter most for long-term growth.

Focusing on the Right Churn at Every Growth Stage

Your focus on these subscription business KPIs will evolve as your company grows. Using the right metric at the right time ensures you are solving the most relevant problems for your current stage.

Pre-Seed and Seed Stage: Validating Product Stickiness

At this early stage, your primary focus should be on logo churn. The key question is simply: do we have a sticky product that anyone wants to keep using? High logo churn could indicate a fundamental product-market fit problem. Your goal is to get a cohort of users who love the product, regardless of their size.

Series A: Defining Your Ideal Customer Profile

As you move to Series A, your focus shifts to gross revenue churn and segmentation. Now that you know the product is sticky for someone, you need to identify who your Ideal Customer Profile (ICP) is. By analyzing churn across different segments, you can answer the question: who is our ICP and why do they stay? This insight drives more efficient marketing and sales spending.

Series B and Beyond: Systematizing Expansion

For Series B companies and later, the key metric becomes net negative revenue churn. Your business model should now be a proven engine. The primary question is: how do we systematically drive expansion from our existing customer base? Achieving net negative revenue churn proves your business can grow even without adding new customers, a powerful signal to investors and a hallmark of an efficient SaaS model.

Why Both Churn Metrics Are Critical for SaaS Growth

Understanding the difference between logo churn and revenue churn moves you from simply tracking metrics to strategically managing your business. These numbers provide a roadmap for where to invest your limited time and resources. For any SaaS business, mastering these concepts is fundamental.

Remember these key points:

• Logo churn tells you how many customers are leaving.
• Revenue churn tells you how much money is leaving.
• Divergence is insight. A big gap between the two tells a critical story about your Ideal Customer Profile and product-market fit.
• Aim for directional accuracy. Do not get paralyzed by messy data. A good-enough number calculated in a spreadsheet is better than no number at all.

By focusing on the right metric at the right time, you can build a resilient, growing company focused on creating value for the right customers. Explore the SaaS metrics hub for more related guides.

Frequently Asked Questions

Q: Which churn metric is more important: logo churn or revenue churn?
A: Neither is more important; they tell different stories. Early-stage startups often focus on logo churn to validate product stickiness. As a company scales, revenue churn becomes increasingly critical because it reflects financial health and the ability to retain high-value customers, making it one of the most vital subscription business KPIs.

Q: What is a good logo churn rate for a SaaS company?
A: A good logo churn rate varies by market. For SaaS companies serving small businesses (SMBs), a monthly rate of 3-5% is often considered healthy. For enterprise SaaS, the expectation is much lower, typically below 1% per month. The target always depends on your specific customer segment and price point.

Q: Can net revenue churn be negative?
A: Yes, and it is the goal for most SaaS businesses. Net negative revenue churn occurs when the revenue gained from existing customers (upgrades, cross-sells) is greater than the revenue lost from customers who cancel or downgrade. It means your business can grow even without acquiring any new customers.