Churn is one of the single most important metrics in determining the day to day health of the business. Acquiring new customers is time and capital intensive, and this growth is meaningless if those customers do not stay.
Businesses typically track and measure three churn rates on an ongoing basis: customer churn, gross dollar churn and net dollar churn. Since each metric helps highlight a different trend that may be happening with your users, it makes sense to track all three.
Customer Churn (Logo Churn)
This metric measures the number of customers you lose over a period of time.
Benchmarks: These numbers tend to significantly vary based on the type of customers you are acquiring (e.g., the numbers for a prosumer subscription business would be very different than those of a SaaS business selling to the Fortune 1000). We typically spend less time looking at customer churn benchmarks internally.
Gross Dollar Churn
This metric looks at your total lost revenue both from customers churning and from down-selling (e.g., your customer on the $1000/month plan downgrades to the $100/month plan).
Benchmarks: Best-in-class gross dollar churn is typically less than 1% on a monthly basis. It is important to note that at early stages of a company when customer numbers are small, there will be a good amount of variation on a month-to-month basis. However, over time, it should be easier to get a feel for a longer-term churn rate for the business.
Net Dollar Churn
This metric looks at the revenue you are losing from customers churning or down-selling less the gains from upsell (effectively, the change in your monthly recurring revenue excluding new bookings).
Benchmarks: The best-in-class benchmark for this metric is negative net dollar churn — these companies will still grow even if they did not acquire a single new customer.
Source: https://www.forentrepreneurs.com/demystifying-churn/
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