I've been running a B2B SaaS for about 5 years now. Thinking about an exit in the next 18-24 months. Our monthly churn is around 6-7% for SMB customers, but enterprise is closer to 1%. Blended it's maybe 4-5%. Is that an instant "no thanks" from buyers, or is there a range where it's still sellable? I keep hearing different things.
SaaS
What churn rate makes a SaaS business completely un-sellable?
Blended churn hides the real story. Buyers will segment your logo vs revenue churn and immediately zero in on the SMB cohort. 6-7% monthly is basically a leaking bucket. You can still sell, but it won't be a strategic multiple—more like a distressed asset or a project for someone who thinks they can fix it.
Anything above 5% monthly logo churn for SMB and you're fighting an uphill battle. Not impossible, but the valuation gap between you and a 2% churn business is massive. I've seen deals fall apart in diligence over this exact metric.
What's your net revenue retention? That matters more than raw churn sometimes. If you're losing logos but expanding revenue per account, it's a different conversation.
NRR is around 95-100% depending on the quarter. So not terrible, but not great either. The SMB churn is really what's dragging it down.
95% NRR with 6% SMB churn is a tough sell. Not zero chance, but youre looking at a lower multiple or an earnout-heavy structure. Buyers will want protection against that churn continuing post-close.
This. An earnout is basically the buyer saying "we don't trust your numbers." Which, fair enough.
Could you just kill the SMB segment and focus on enterprise? Obviously easier said than done, but that might actually make the business more attractive to a buyer who wants clean metrics.
SMB is actually the majrity of our revenue right now. So killing it isn't realistic. But I get what you're saying—it's the problem child.
Bro just fix the churn. Easy. I'll show myself out.