Attrition rate

The attrition rate (or churn rate) measures the proportion of customers, subscribers or recurring contracts lost over a given period relative to the opening base. It is a fundamental valuation driver for SaaS companies, subscription services and any business model with recurring revenues: a high churn rate compresses customer lifetime value, undermines revenue predictability and increases the operational risk factored into the WACC. Cohort-level attrition analysis is a priority in financial due diligence to detect adverse trends masked by aggregate figures.

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Example: a SaaS company with CHF 4.0 million ARR and 18% gross annual attrition is valued at 3.5x ARR — versus 6.0x for a comparable with sub-5% churn. Cohort analysis reveals that attrition is concentrated in the SME segment (28% churn) while enterprise clients show only 5% churn, supporting a restructured valuation focused on the high-retention enterprise segment.

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At Hectelion, attrition analysis is a central component of every SaaS and subscription business due diligence and valuation engagement.