Why SMB churn is brutal
Small business SaaS products live and die on churn. Median monthly logo churn is 4.7% — that means roughly 45% of customers gone in a year before considering expansion. Compare to 10–12% annual for mid-market and under 5% annual for enterprise.
The drivers
- SMB failure rate — about 20% of churn is "customer went out of business"
- Self-serve cohorts — credit-card payers churn 2–3× sales-led signups
- Annual vs monthly billing — annual cuts churn ~40%
- Product activation — customers who use 3+ features in week 1 churn 60% less
NRR as the true signal
Net dollar retention (NDR / NRR) is the cleaner metric for SaaS investors. Median SMB NRR is ~92%; top quartile is 105%+; best-in-class (Toast, Mindbody, ServiceTitan-era) reach 115% via aggressive expansion in seats + add-on modules.
Sources