Retention

Retention is the percentage of customers or revenue you keep from one period to the next. Churn is its mirror image: the percentage you lose. The two always add up to 100 %.

Retention = 100 - Churn

If a B2B SaaS firm begins January with €100K in monthly recurring revenue (MRR) and ends with €92K from the same accounts, it kept 92 % (retention) and lost 8 % (churn). In a retainer agency, holding 45 of 50 clients over the quarter means 90 % retention and 10 % churn. A law-firm practice that renews 18 of 20 annual contracts posts 90 % retention. However you charge—seats, hours, projects—the maths is identical.

Revenue compounds instead of leaking

When churn stays low, each new deal stacks on a solid base rather than replacing last quarter’s losses. Compounding cash flow funds R&D, hiring, and marketing without constant fund-raising.

Acquisition costs fall over time

A loyal client generates expansion revenue and referrals, cutting effective customer-acquisition cost (CAC). Keeping an existing buyer is 3–5 × cheaper than winning a new one.

Valuation and investor appeal rise

Private-equity and strategic buyers pay premiums for businesses with net revenue retention (NRR) above 100 %. Consistent retention signals product-market fit and predictable cash generation.

How to measure retention and churn‍

Customer retention rate

(number of customers still active at period end ÷ number of customers at period start) × 100

Example: keep 45 of 50 clients → 45 ÷ 50 = 0.90 → 90 % retention (10 % churn).

Revenue (or net) retention

(start-of-period recurring revenue – revenue lost to churn + expansion revenue) ÷ start-of-period recurring revenue × 100

Example: begin with £100 k MRR, lose £8 k, add £5 k in upsells → (100 – 8 + 5) ÷ 100 = 0.97 → 97 % net revenue retention.

How to improve retention (and cut churn)

Onboarding that proves value fast

A customer is most at risk in the first 30 days. Create a step-by-step launch plan: kickoff call, success criteria document, training videos, and a celebratory email when the first result appears. A bookkeeping agency, for instance, can provide a “zero-error ledger” report within the first fortnight to show immediate impact.

Continuous value delivery

Schedule QBRs (quarterly business reviews) or monthly optimisation calls. Each session links delivered work to client KPIs—traffic lifts, closed deals, risk reduction. Consistent storytelling reminds buyers why they pay the invoice.

Proactive health monitoring

Set usage and engagement alerts: if SaaS log-ins drop 50 % week-over-week, trigger a success-manager call. Agencies can flag clients who skip two status meetings in a row—often a pre-churn sign.

Expansion pathways

Add complementary services or seat-based upsells that extend value, such as advanced reporting modules or specialised workshops. Expansion revenue offsets inevitable small churn and pushes net retention over 100 %.

Systematic feedback loops

Survey NPS every six months, tag verbatims, and log product or process fixes. Close the loop by telling customers, “You asked for X; here’s what we changed.”

Common pitfalls

• Averaging cohorts – Hides a spike in one segment. Slice by plan size or industry.
• Vanity retention – Counting paused accounts as “retained” inflates numbers.
• Single-point surveys – Relying on NPS alone misses silent usage decay.
• Ignoring gross vs net – Expansion can mask high gross churn; track both.

Conclusion

Retention is the silent growth engine: keep more of what you already sold, and revenue compounds. Churn is its drag force. Measure both, watch leading indicators, and invest in onboarding, continual value, and expansion to push net retention above 100 %. That steady base turns every new client into pure, predictable growth.