Renewal rates shape revenue stability, signal product-market fit, and reveal how well a company is supporting customers long after their initial purchases. When software-as-a-service (SaaS) renewal rates rise, it usually means the product is delivering steady value and customers see it as necessary. When renewal rates fall, the underlying causes tend to appear quickly in the data.

Below, we’ll explain how SaaS renewal rates are calculated, what factors to monitor in subscription analytics, and how teams can improve rates.

What’s in this article?

• What is a SaaS renewal rate?
  
• How is a renewal rate calculated for a subscription business?
  
• What factors most influence SaaS renewal performance?
  
• What strategies help improve SaaS renewal rates?
  
• How to track and analyze renewal rate data effectively
  
• What challenges do SaaS companies face in maintaining strong renewal rates?
  

What is a SaaS renewal rate?

A SaaS renewal rate is the percentage of customers who decided to continue their subscriptions when their most recent terms ended. In other words, it’s how many people stayed versus how many left. Customer retention differs from broader retention metrics because it looks at who’s still with you over a given time period. A company can look stable in overall retention numbers despite struggling to retain customers at renewal time.

Industry benchmarks vary, but many SaaS businesses want renewal rates of 80%–90% or higher. Because subscription businesses grow through compounding loyalty, the renewal rate is one of the best markers of long-term health.

How is a renewal rate calculated for a subscription business?

There are two ways for your business to track renewals: by customers and by revenue. Let’s look at each.

Customer renewal rate

To calculate your business’s customer renewal rate, look at the group of customers whose contracts or billing cycles ended in a given period and measure how many renewed. Here’s the standard formula:

Customer Renewal Rate = (Renewed Customers ÷ Customers Up for Renewal) × 100

Let’s say that in the past quarter 250 customers reached the end of their terms and 200 renewed. Following the formula, your renewal rate would come out to 80%. That is:

(200 ÷ 250) x 100 = 80%

Note that it’s important to include only customers who made it to renewal; new customers don’t belong in the denominator, and cancellations that happened months earlier don’t either.

Revenue renewal rate

Many SaaS companies also track renewal in terms of revenue, because not all customers represent the same contract value. The formula for the gross revenue renewal rate mirrors the customer version:

Revenue Renewal Rate = (Renewed Contract Value ÷ Contract Value Up for Renewal) × 100

The rate can rise above 100% if expansions outweigh losses. If a company had $1.0M up for renewal, for instance, and it saw $1.1M returned, it would have a 110% revenue renewal rate. That’s the foundation of strong net revenue retention.

Here’s a closer look at the math:

(1,100,000 ÷ 1,000,000) x 100 = 110%

It’s also helpful to connect your renewal rate with churn rate, or the percentage of customers who don’t renew their subscriptions. If your renewal rate for a cohort is 85%, the churn rate for that same group is 15%. Pairing these two helps you see both the positive (who stayed) and the negative (who didn’t) without losing context.

Companies often calculate renewal rates by term length (e.g., monthly, annual, multiyear) or by cohort (e.g., first-year renewals). Those segments show patterns, especially initial renewal issues, that other metrics can hide.

What factors most influence SaaS renewal performance?

Whether a customer renews comes down to a mix of product value, experience, economics, and context. Here are the main factors that influence customer churn and SaaS renewal rates.

Product value and real usage

When customers rely on a product to do meaningful work, renewal is much more likely. Declining engagement, shallow adoption, or unused core features can signal that the customer isn’t getting enough out of the product to justify another term.

Customer experience and support quality

If support interactions feel slow, unhelpful, or transactional, then renewal conversations become harder. Businesses need to create support systems that prioritize the customer’s needs.

Pricing and perceived return on investment

People will renew for a product that pays for itself through efficiency gains, revenue impact, or risk reduction. But when pricing doesn’t align with value, renewal is no longer the default choice.

Onboarding and early outcomes

Weak onboarding leads to weak adoption. And a business might learn of it only months later, when renewal is already at risk. To avoid this, businesses need to engage customers continually with training sessions, product tips, and proactive check-ins. These keep customers moving forward and aware of new or underused value.

Competitive pressure and switching costs

Renewals are vulnerable if a competitor offers more attractive pricing, bundles, or features. The more integrated the product is across teams, data, and processes, the harder it becomes for a customer to justify leaving.

Involuntary churn from payment issues

Involuntary churn occurs when customers who intend to stay cannot due to preventable processing failures (e.g., failed payments, expired cards, confusing billing steps). A business must maintain its retention rate by implementing clean billing flows, card updater tools, and renewal reminders.

What strategies help improve SaaS renewal rates?

Clear, consistent habits that make customers feel supported and seen can improve renewal rates over time. Here are some reliable strategies:

• Strengthen everyday product value: Track which capabilities correlate with high renewal rates, then make them easier to discover and adopt. Showcase any new improvements. You want customers to see steady momentum, not stagnation.

• Engage customers early: Build a rhythm of outreach that starts long before the end of a contract. A quick check-in 60–90 days ahead of renewal gives you enough time to fix issues, share results, and confirm customers’ expectations are being met.

• Customize your approach through segmentation: Analyze which customers renew at higher rates and why. Patterns often reveal mismatches in expectations or feature gaps. You can use that insight to develop more targeted tactics such as lighter-touch programs for stable accounts and higher-touch support for segments with lower renewal rates.

• Invest in strong customer success programs: Create a customer success team. A good one can monitor account health, run business reviews, reinforce return on investment (ROI), and guide adoption. To do so, the team needs clear steps for handling early warning signs, re-engaging inactive accounts, and framing the renewal conversation around achieved value.

• Make renewal easy: Remove every avoidable barrier from the renewal and payment process by providing simple notices, straightforward options, and concise payment flows. You can also use automated card updates and smart retry logic to minimize involuntary churn.

• Use incentives with intention: Use discounts or upgraded features to help win back at-risk customers or encourage longer commitments. But do so thoughtfully. The goal is to help customers who need a nudge, not to condition every account to expect concessions.

• Listen to customer feedback: Pay attention to what customers say in support tickets, product surveys, and even cancellation conversations. When multiple accounts cite the same concerns (e.g., missing features, complexity, pricing concerns), tackle them directly.

How to track and analyze renewal rate data effectively

Renewal rate data helps you understand the reasons customers are staying or leaving. Effectively tracking and analyzing your data can help you spot patterns early enough to act.

Here are some effective ways to monitor and assess your data.

Build a clear, consistent view of renewal metrics

Use a dashboard or subscription analytics tool that shows the current renewal rate, churn, and retention trends at a glance. Look for systems such as Stripe Billing that provide built-in churn and retention reporting, which keeps data clean and easy to compare across periods.

Track both customer and revenue renewal rates

Customer count won’t tell you everything about your revenue, and vice versa. You need to monitor both. Losing a few small accounts affects your renewal rate more than your revenue. But losing a large account decreases your revenue significantly, even if the rate looks fine.

Use cohort and time-based analysis

Breaking renewal rates down into useful cohorts reveals patterns you can’t see in an overall average. Try filtering your data by these categories:

• First-year renewals

• Annual vs. monthly terms

• Customers acquired during a specific quarter

• Customers on a certain plan

Analyze the results to see whether new customers are struggling after onboarding or whether a particular plan consistently underperforms at renewal.

Correlate renewal outcomes with behavior

Look at product usage trends, feature adoption, support history, satisfaction scores, and even the customer’s original acquisition channel. Customers who use important features regularly or log in consistently usually renew at higher rates.

What challenges do SaaS companies face in maintaining strong renewal rates?

Even teams with solid products and reliable customer success programs feel pressure at renewal time. Here are some common challenges:

• Rising customer expectations: If the product feels slow to develop, then renewal conversations get tougher, even if it still works as intended.

• Competitive pressure: New entrants, aggressive bundling, and lower-cost alternatives give customers reasons to reassess. When switching feels like an easy decision, renewal isn’t guaranteed.

• Pricing sensitivity and budget shifts: In tighter markets, customers scrutinize every subscription so price increases hit harder. And regardless of their historical performance, “nice to have” tools get cut first.

• Organizational changes on the customer side: When a proponent of the product leaves or a team restructures, the original reasons for buying the product can disappear.

• Customer success: As a business’s customer base grows, maintaining consistent support and visibility becomes harder. Without the right systems or automation, early warning signs slip through and at-risk accounts go unnoticed.

Stripe Sigma makes it easier for businesses to gain insight, track trends, and analyze patterns in their data down to the transaction level. Learn more about Stripe Sigma, or get started today.