What's a Good Churn Rate for SaaS Companies in 2026?

A good annual churn rate for a B2B SaaS company in 2026 is under 5%. The median B2B SaaS company churns 3.5% of its customer base annually — 2.6 percentage points from voluntary cancellations and 0.8 from failed payments — according to Recurly's 2025 Churn Report, cited in SHNO's 2026 SaaS churn benchmark analysis.

Churn rate measures the percentage of customers (or revenue) a company loses over a given period. That 3.5% median is a starting point for comparison, not a target — whether it's good or bad for your company depends heavily on customer segment, contract length, and average deal size.

Churn Benchmarks by Customer Segment

Company size changes what "good" looks like:

• SMB-focused SaaS (self-serve, low average contract value): monthly churn of 3-5% is typical; getting under 2% monthly is considered strong for this segment
• Mid-market: 1.5-3% monthly churn is the norm
• Enterprise: 1-2% monthly churn is standard, with best-in-class enterprise vendors holding under 1%

The pattern is consistent: longer contracts, higher switching costs, and deeper product integrations all push enterprise churn well below SMB churn. If you're benchmarking a self-serve product against an enterprise-sales SaaS company's numbers, you're comparing the wrong cohort.

Voluntary vs. Involuntary Churn

Not all churn comes from customers deciding to leave. Payment failures — expired cards, insufficient funds, failed renewal charges — account for 20% to 40% of total SaaS churn industry-wide. This is involuntary churn, and it's the most fixable share of the number: dunning emails, automatic card retries, and updated payment method prompts recover a meaningful portion of these failed renewals before they become a canceled account.

If your churn rate looks high, split it into voluntary and involuntary before assuming you have a retention problem. A company churning 4% annually with 1.5 points coming from failed payments has a payments problem, not a product problem.

Why Annual and Monthly Numbers Get Confused

A 3.5% monthly churn rate compounds to roughly 35% annually — a very different number from a 3.5% annual churn rate. When comparing your churn to a benchmark, confirm whether the cited figure is monthly or annual; conflating the two is one of the most common mistakes in SaaS churn reporting.

How Churn Rate Is Calculated

Churn rate is the number of customers lost during a period divided by the number of customers at the start of that period, multiplied by 100. A company starting the month with 1,000 customers and losing 35 of them has a 3.5% monthly churn rate. Revenue churn, calculated the same way using recurring revenue instead of customer count, tells a different story when large accounts churn at a different rate than small ones — a business can hold flat logo churn while revenue churn rises if its biggest accounts are the ones leaving.

Bottom Line

Don't benchmark your SaaS company against the blanket 3.5% median without adjusting for segment: SMB products should expect meaningfully higher churn than enterprise products, and involuntary churn from failed payments deserves its own fix before you invest in broader retention work. If your monthly logo churn is running above 2% for a self-serve product or above 1% for an enterprise product, start with payment recovery — it's usually the fastest lever to pull.

Source: SHNO, "SaaS Churn Benchmarks for 2026," citing Recurly's 2025 Churn Report.