Churn is the leak in the SaaS bucket, and measuring it precisely is essential. Gross MRR churn is the percentage of recurring revenue lost in a period from cancellations and downgrades, before adding any expansion revenue. Net MRR churn subtracts expansion, and negative net churn occurs when expansion revenue exceeds churn plus downgrade revenue—meaning the existing base is a net source of new revenue even before any new logos are signed. The same idea applies at the contract level: revenue churn measures lost revenue, while logo churn (also called customer churn) measures the percentage of customers lost regardless of their size. These two rates can diverge sharply when account sizes vary widely.
Retention metrics frame churn from the opposite direction. Gross Dollar Retention (GDR) is the percentage of starting ARR retained from existing customers, including downgrades but excluding expansion, with a floor at 0%. Net Dollar Retention (NDR)—also called Net Revenue Retention (NRR) when annualized—includes expansion and can exceed 100%. A world-class NDR sits above 120%, with leaders often at 130%+, while anything below 100% means the existing customer base is shrinking. The standard 12-month NRR benchmark for top-quartile public SaaS companies is above 120%, and top-quartile B2B SaaS companies report annual GDR of 90%+. Retention and churn are complements: in any simple period, retention rate plus churn rate equals 100%.
Not all churn is the same. Voluntary churn happens when a customer actively cancels, while involuntary churn stems from failed payments and is often recoverable through dunning—retrying cards and communicating with customers to collect. In B2B SaaS, 20–40% of churn events are involuntary, making payment recovery a meaningful lever. The "leaky bucket" metaphor captures the dynamic clearly: churn is water leaking out, expansion is water being added in, and net new MRR is the change in bucket level. Reactivation revenue, from previously churned customers returning, also pours back in. Distinct from negative churn, negative growth means the entire company is shrinking—the existing base alone cannot keep the business expanding. For B2B SaaS, a good monthly logo churn rate is under 1% (around 12% annually), and a good annual gross revenue churn rate is typically under 5–7%, with best-in-class below 5%.