Implement churn forecasting in B2B Tech / B2B SaaS and Plan for Net New ARR

All B2B tech / B2B SaaS companies forecast new bookings. But sales forecasting only tells part of the story. Without churn and downsell forecasting, you’re missing the other side of the equation—potential revenue loss. Just as sales forecasting provides insights into incoming revenue, churn forecasting sheds light on potential revenue losses. Let’s see how to forecast churn in B2B Tech / B2B SaaS so that you can combine it to sales forecasting, and then correctly anticipe Net New ARR, NRR, and GRR aggregates. 

Exec Summary

To forecast churn in B2B Tech / B2B SaaS, and procure accurate numbers, follow a 3-step approach:

• Step 1: Detect early-stage churn risk signals by linking churn identification to an account health scorecard.
• Step 2: Create and manage a pipeline of churn deals with forecast categories, mirroring your sales forecasting methodology.
• Step 3: Implement churn risk governance by empowering KAM and CSM teams with a churn forecasting playbook that defines clear processes and rules.

Step 1: Identifying Early-Stage Churn Risks

When a customer notifies you of their intention to churn or downsize, it’s often too late to intervene. By that point, the decision has likely been made and validated internally. Unlike the classical sales cycle, which begins with an explicit buying signal, effective churn forecasting hinges on detecting implicit early-stage churn risks—those weak signals that allow you to proactively allocate resources and mitigate risks before they escalate.

Tying Churn Risk to Account Health Criteria

To identify churn risks, connect churn management to your account health scorecard. By relying on objective criteria, you reduce biases created by personal opinions and rationalize early warnings of disengagement, allowing you to take action before churn becomes inevitable. Depending on your account health structure, consider the following criteria:

• Product Under-Utilization: Declining usage metrics, such as fewer logins or reduced feature adoption, often indicate dissatisfaction. A gap between the customer’s commitment to the solution and their actual usage may lead to reevaluating their spending.
• Stakeholder Turnover: Changes in decision-makers or the departure of champions within an account can introduce new perspectives on your value proposition, increasing churn risk.
• Contractual Milestones: Upcoming renewal dates or the conclusion of project engagements can present both opportunities and risks, depending on customer satisfaction.
• NPS / Customer Satisfaction: Drops in formal customer satisfaction metrics are strong indicators requiring immediate attention.

Additionally, external factors such as compliance changes, shifts in customer financial health, company takeovers, or other industry-specific risks should also be included, as they can significantly impact churn likelihood.

Combining Perspectives from Different Teams

To detect these early signals, gather input from all stakeholders involved in the customer relationship—typically KAMs, CSMs, Professional Services, or executives with client relationships. For example, a KAM might report that a customer executive is strategically aligned with your company’s vision, while a CSM highlights discrepancies between the perceived value of the product and its actual usage by the operational team.

In such situations, if the decision-maker is strong and committed to a medium-term vision, churn risk is likely low. However, if the relationship’s rationale is tied primarily to product usage, churn risk is significantly higher.

By embedding these signals into your account health evaluations, your organization can establish a proactive churn detection approach, enabling you to mitigate risks effectively and strengthen customer retention efforts.

Step 2: Managing a Pipeline of Churn Deals

To forecast churn in B2B Tech / B2B SaaS with a robust methodology, adapt the principles of sales forecasting to address customer retention. This includes the use of deals, pipeline stages, and forecast categories, ensuring consistency while addressing the unique dynamics of churn.

Creating Churn Deals

To address churn risks systematically, create churn deals in the same way you create deals for new revenue opportunities. Each churn deal represents revenue (partially or fully) at risk, enabling your team to:

• Track churn risks within the same CRM system used for sales.
• Assign ownership to ensure accountability for preventing churn.

This structured approach turns churn risks into actionable items, just like opportunities in a sales pipeline.

Managing a Churn Pipeline

Once churn deals are created, incorporate them into a dedicated pipeline. Define specific stages to manage how these deals progress within the customer decision-making process, whether they renew or churn. Relevant stages might include Cancel notification Period, Decision Pending, Auto-renew period, Closed Lost, Closed Cancel. This pipeline provides visibility into churn risks and clarifies where intervention is needed (Struggling to implement a churn management process? Look at our masterclass Churn2Commit ©).

Defining Churn Forecast Categories

Similar to sales forecasts categorized as “Commit,” “Upside,” or “Pipeline” based on their likelihood of closing, churn forecasts require clearly defined categories based on their probability of materializing. Examples might include:

• At Risk: Early warning signals or weak engagement indicators.
• Critical Risk: High likelihood of non-renewal.
• Lost: Confirmed churn.

Aligning churn categories with sales forecasting frameworks creates a unified process that’s easier for teams to understand and execute.

Step 3: Implementing Churn Risk Governance

Implementing churn forecasting in B2B Tech . B2B SaaS requires clear ownership, a well-configured CRM, and a governance process consolidated into a churn forecasting playbook to ensure long-term effectiveness.

Assigning Goals and Accountability

Define churn goals in the same way you establish sales goals, tying them to overall revenue objectives such as maintaining an acceptable churn percentage for sustainable growth. Use historical data to set ambitious yet realistic targets.

Determine who is responsible for achieving these goals and align compensation plans accordingly. While most B2B Tech / B2B SaaS organizations have KAMs and CSMs, accountability models vary. Some organizations prefer KAMs to own churn due to their strategic focus, while others lean towards CSMs, given their operational role (Struggling to implement a churn management process? Look at our masterclass Churn2Commit ©).

Configuring Your CRM for Churn Deals

To support churn forecasting, your CRM must include a dedicated churn pipeline. Customize it to capture relevant data points, such as account health scores and churn forecast categories, ensuring your team has the information needed to act.

Establishing Churn Risk Governance

Just as sales pipelines are reviewed weekly, your churn pipeline requires a structured governance process. Schedule recurring churn review meetings with KAMs, CSMs, and leadership to:

• Share customer insights.
• Update the status of churn risks.
• Prioritize mitigation actions.

This governance process ensures that churn forecasting becomes an integral part of your revenue planning, rather than an afterthought.

Conclusion: Build a Playbook to Forecast Churn

To forecast churn in B2B Tech / B2B SaaS accurately, document your approach in a churn forecasting playbook. This playbook should:

• Clearly define churn and its associated categories.
• Outline the methodology for creating and managing churn deals.
• Specify how data should be captured and tracked in your CRM.
• Include training materials to ensure all stakeholders understand their roles and responsibilities.

This proactive approach to manage churn risks not only mitigates revenue losses but also strengthens customer relationships, positioning your business for long-term success in the B2B tech / B2B SaaS industry. By forecasting churn into your processes and culture, you gain a comprehensive understanding of your revenue flows, enabling a Net New ARR forecast that eliminates blind spots in financial planning.

To continue exploring forecasting, have a look at our article about sales forecasting: Sales forecasting in B2B Tech / B2B SaaS: Move away from activity based forecasting to get accurate numbers.

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