Software Growth

Involuntary churn

Involuntary churn is subscription loss caused by failed payments, such as expired cards or declined charges, when the customer never decided to cancel.

Involuntary churn is the part of customer churn where the customer did not choose to leave. Their card expired, their bank declined the charge, or a technical error blocked the payment, and your billing system eventually canceled the subscription. It is the cheapest churn to fix, because these customers were happy enough to be paying.

How big is it

Figures come from payment vendors, so read them as ranges. Stripe says that 25% of lapsed subscriptions are purely due to payment failures. Paddle says failed payments account for as much as 40% of some companies' churn. Baremetrics reports that the typical business loses about 9% of MRR to failed payments. Your own number is easy to find: tag every cancellation as "payment failed" or "customer canceled" and compare.

How to measure it

Out of 500 customers at the start of the month, 15 cancel on their own and 10 are dropped after failed payments. Total churn is 25 / 500 = 5%, and involuntary churn is 10 / 500 = 2%. That means 40% of your churn needs a billing fix, not a product fix.

Why payments fail

Paddle groups the causes into four: system errors, card problems such as expiry or wrong details, insufficient funds, and fraud-protection blocks. Card expiry is the predictable one, which is why updating cards before they expire works.

What to do about it

  • Turn on automatic retries. Stripe's Smart Retries picks retry times from payment signals, and its documentation recommends 8 attempts over 2 weeks as the default.
  • Send dunning emails the moment a payment fails, with a direct link to update the card.
  • Warn customers before cards expire. Baremetrics reports a 14.37% recovery rate for emails sent 30 days before expiration.
  • Know which declines cannot be retried. Stripe lists lost, stolen and incorrect-number codes as ones that only succeed once the customer provides a new payment method.
  • Keep the customer's access alive for a grace period of a few days while you recover the payment.

Why it is worth it

Stripe reports that subscriptions recovered from payment failure continue for seven more months on average. For a small SaaS with $20,000 MRR and 2% monthly involuntary churn, that is about $400 of MRR a month that a decent retry and email setup can recover a large share of. It is one of the few retention projects you can finish in an afternoon.

Sources

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