How to Identify Customers at Risk of Churn

Key takeaways:

Identifying customers at risk for churn allows you to proactively make changes to improve client retention and overall profitability
It’s essential to prioritize retaining high-value customers, which may be those that retain your services for longer or spend more and have higher LTVs
Implementing strategies like analyzing user behavior, setting up dunning management, and using customer segmentation can help you better spot at-risk users
Baremetrics’ Recover and Cancellation Insights tools can help you identify users at risk for voluntary and involuntary churn— and intervene to retain them

Reducing churn is the single most important thing your SaaS company can do to improve its growth. By some estimates, it is up to 25 times cheaper to keep a customer happy than to onboard a new one.

So, how do you identify customers at risk of churn? In this article, I will list a series of actions you can take to identify cohorts of customers most at risk of churn and give you positive actions you can take to reduce and even prevent customer churn.

By the end, you will have all the tools you need to reduce churn at your SaaS enterprise.

Collect reasons why customers cancel with Baremetrics

How Identifying Users At-Risk Can Minimize Revenue and Customer Churn

Let's discuss the importance of reducing different types of churn for revenue growth.

Churn is basically the speed at which you lose business. (You can see how to calculate churn for details.) It is usually represented as a percentage. There are different types of churn, including gross and net churn, revenue churn, and customer churn. Let’s review the differences between revenue churn and customer churn.

1. Revenue Churn

Revenue churn is the amount of monthly recurring revenue (MRR) you are losing due to cancellations and downgrades each month. You can calculate revenue churn using the following equation:

Revenue Churn = ((Churn MRR + Contraction MRR)) ÷ MRR at Start of Month) × 100

Note that Churn MRR is the MRR lost from cancellations, while Contraction MRR is the MRR lost from existing customers due to downgrades.

While I’m focusing on customers in this article, revenue churn should also be considered because not every customer is equally valuable to your company. You should always focus on the most valuable customers when you have limited resources. Calculating LTV for churn can help with this.

Baremetrics provides a broad overview as well as daily breakdowns into revenue churn. Take a look:

Revenue churn

2. Customer Churn

Customer churn is the percentage of customers that are leaving your service per month. It can be calculated using the following equation.

Customer Churn = (Customers Lost During the Month ÷ Total Customers at the Start of the Month) × 100

What Should You Do About Customers at Risk of Churn?

Fundamentally, your goal with customers at risk of churn is to keep them using your product. You can do this by targeting the right customers in the first place, providing them with a high-quality service tailored to their needs, and continually tracking their user behavior for indications of displeasure.

I will address these actions in order, so that by the end, you will have an effective strategy starting with marketing and continuing on through the entire customer lifetime.

Sign Up the Right Customers

Do you have a well-defined ideal customer profile (ICP)? If you don’t know what that is, stop and check out the article. You should plan your entire marketing strategy around a specific ICP.

If your product has broad appeal, developing multiple specific ICPs is better than one ICP that is too broad. Refining an ICP and targeting only prospects who match this profile will curb your churn rate before your customer signs up.

That’s because the right customers can extract the most value from your product. As long as customers profit from your app, they will remain subscribed and you can reduce SaaS churn.

Strive for Meaningful Engagement

Starting from the moment you get a lead, you should use all available tools to encourage customers to integrate your product into their business processes.

During the free trial period, start sending emails to your prospective clients, pointing out interesting features, explaining how to use your platform, and nudging them back to your site to try the tools.

By getting your clients to use the features of your SaaS product to their full potential early and often, you guarantee that they are getting as much value as possible from your product.

Track User Behavior Data

Keep track of all the available user behavior data. This information lets you know which features your users are getting the most value from.

Your marketing, sales, and customer success teams should be engaging with your clients on a regular basis and encouraging them to interact with your platform.

Meanwhile, your data analytics and dev teams should track and map how users interact with your platform. This will help your dev teams optimize the parts of the platform that are most used.

This process is an invaluable feedback loop:

You track how customers use your platform.
You further develop the platform based on market demands.
You proceed to market to a population that needs those features (specific ICPs).

Behavior data is an important part of a churn analysis, which can be helpful in identifying all potential causes of churn.

Keep Track of Payment Information

Some customers will realize that your product isn’t for them and leave. However, a proportion of customers actually churn involuntarily.

Involuntary churn occurs when a customer leaves your platform not by choice but because of another issue, such as a credit card payment failure.

Baremetrics’ Recover tool - which leverages dunning management for churn can help you prevent involuntary churn by activating automatic processes to get clients to go back and fix their payment issues. Take a look:

Recover tool

Keeping an eye on unopened credit card details through update emails can help you identify customers at risk of churn. You can then execute other strategies to encourage users to actively use your product.

Recover automates your dunning process, so you never have to worry about losing customers involuntarily. Recover’s payment processor can be fully integrated into your Baremetrics dashboard. The best part? It pays for itself – on average, Recover makes back 38x what it costs. Try it as part of your Baremetrics free trial today.

Use Customer Segmentation to Develop Re-engagement Plans

Not every customer is the same, however, groups of customers who share certain characteristics such as geographic location, or choice of subscription tier, exhibit similar user behavior.

Working with these cohorts separately can help you develop re-engagement plans that work best for each group. For example, if your customers in America seem to be more active than those in Canada, you can try and figure out why the Canadians are not getting as much value out of your platform.

Baremetrics Segmentation can do all of this for you. Take a look:

Monthly Recurring Revenue

Baremetrics’ Cancellation Insights can also be useful here. This tool helps you better understand what’s causing different customers to cancel, including calculating lost revenue by cancellation reason. You may notice different audience segments have different reasons for churn, which would require unique re-engagement strategies.

Identify customers at risk of churn with Baremetrics

The business growth principles are simple: sign up and retain as many customers as possible. It is possible to actively achieve a negative churn rate, where you attract more customers than you lose.

The more you learn about your customers and how they interact with your product, the better you can retain happy customers.

Baremetrics offers more than 26 separate metrics to track and segment your user information. These tools can help you adapt your product to customer needs, reduce churn among current users, and identify and attract your ICPs.

Tired of wasting time on spreadsheets? Get a free trial of Baremetrics today!

FAQ

What is churn risk in a SaaS business?

Churn risk is the likelihood that a specific customer or segment of customers will cancel, downgrade, or stop paying within a given period. For subscription businesses, churn risk is not a single number but a spectrum: some customers show early warning signs like declining product usage, missed payments, or a drop in feature engagement, while others appear stable until they suddenly cancel. Understanding churn risk at the customer level lets SaaS operators prioritise retention efforts on the accounts most likely to leave, rather than treating every subscriber the same. The goal is to catch at-risk customers before the revenue is gone, not after it shows up as churned MRR in your dashboard.
What is the difference between churn risk and churn rate?

Churn rate is a backward-looking metric that measures the percentage of customers or revenue you already lost during a given period, while churn risk is a forward-looking signal that identifies which customers are likely to churn before they actually cancel. Churn rate tells you how serious your retention problem is historically; churn risk assessment tells you where to focus right now to prevent the next wave of cancellations. For SaaS founders and finance teams tracking MRR, treating churn rate as the only signal is reactive. Building a process to score and monitor churn risk at the cohort or customer level gives you something to act on before it hits your revenue churn numbers.
How do you identify customers at risk of churn using customer conversation data?

Identifying churn risk using customer conversation data starts with connecting qualitative signals, such as support tickets, cancellation survey responses, and customer success call notes, directly to the billing and usage metrics for each account. When a customer submits a complaint about a core feature, reduces their seat count, or stops responding to success outreach, those signals should be mapped against quantitative indicators like declining login frequency, contraction MRR, or a billing interval change. Baremetrics Cancellation Insights captures the reasons customers give when they cancel and ties that reasoning to lost revenue by segment, which means you can see not just that a cohort is churning but exactly what they said on the way out. From there, you can build re-engagement workflows tailored to each cancellation reason rather than sending the same generic save offer to every at-risk account.
How do I measure and reduce involuntary churn caused by failed payments?

Reducing involuntary churn caused by failed payments starts with separating revenue lost to payment failures from revenue lost to deliberate cancellations, because the interventions for each are completely different. Once you connect your Stripe, Braintree, or Recurly data to Baremetrics, you can see your failed charge rate and the MRR at risk in real time. Activating Baremetrics Recover then automates the dunning process by retrying failed payments and sending targeted recovery emails to customers before the subscription lapses. From there, you can track recovered MRR over time to measure the direct revenue impact of your dunning workflow, and use cohort analysis to identify which billing intervals or pricing tiers see the highest rates of payment failure. On average, Recover returns 38 times what it costs, making it one of the fastest ways to reduce client churn without acquiring a single new customer.
How do I benchmark my churn rate against similar SaaS companies to know if my churn risk is serious?

Benchmarking your churn rate against comparable SaaS companies gives you the context to judge whether your current churn risk is a product problem, a pricing problem, or simply the cost of operating in a particular market segment. Baremetrics publishes open benchmark data drawn from hundreds of subscription businesses, covering metrics like average monthly churn rate, LTV, and MRR growth by company stage, which lets you see how your numbers compare to businesses at a similar revenue scale rather than relying on generic industry averages. If your customer churn rate is running significantly above the benchmark for your MRR tier, that is a strong signal to prioritise retention work. If it is in line with peers, the higher-leverage move may be improving trial conversion or reducing contraction MRR rather than treating churn as your primary growth constraint.

How to Identify Customers at Risk of Churn

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