To study churn, we need to look at a particular group of customers that signed up in a particular time period. We refer to these groups as cohorts. So you might have a Jan 2014 cohort which is comprised of all the customers that signed up in Jan 2014. We will then want to track how many customers we retain, and how the revenue for each cohort evolves over time. Here is a graph that shows what happens to the number of customers in a particular cohort over several years with three different monthly Customer Churn Rates.
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Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable.