What Is Churn Rate?
The percentage of customers who stop using your product or service over a given period, indicating retention health and product satisfaction.
Churn Rate Explained
Churn rate measures how many customers you lose over a specific time period. Monthly churn of 5% means that out of every 100 customers at the start of the month, 5 cancel or stop purchasing by month end.
For subscription businesses, churn is calculated as customers lost divided by total customers at the start of the period. For transactional businesses, churn is typically defined as customers who have not purchased within a defined window (90 or 180 days).
The impact of churn compounds over time. At 5% monthly churn, you lose 46% of your customers per year. At 3% monthly churn, you lose 31%. That difference determines whether your business grows or shrinks, because new customer acquisition must outpace churn just to maintain revenue.
Revenue churn (also called dollar churn) is often more important than customer churn. If you lose 10 small customers but retain 1 enterprise customer who expands, your revenue churn can be negative (net revenue retention above 100%) even with positive customer churn.
Why Churn Rate Matters
Churn is the silent killer of growth. Companies can grow revenue 30% year-over-year and still be unprofitable if churn exceeds 15% annually. Reducing churn by even 1-2% has a compounding effect that exceeds most marketing investments in ROI.
How to Calculate Churn Rate
Monthly Churn Rate = (Customers Lost in Month / Customers at Start of Month) x 100Common Mistakes
- 1
Only measuring customer churn without tracking revenue churn separately
- 2
Measuring churn annually when you should track it monthly to catch trends early
- 3
Treating all churn equally instead of analyzing churn reasons by segment
Related Terms
Customer Lifetime Value (LTV)
The total revenue a business expects from a single customer over the entire duration of their relationship.
Net Revenue Retention (NRR)
The percentage of recurring revenue retained from existing customers over a period, including expansions and contracting, excluding new customers.
Same-Store Sales Growth
Revenue growth at existing locations compared to the same period last year, isolating organic growth from growth driven by opening new locations.
How Attainment Helps
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Frequently Asked Questions
What is a good churn rate?
For B2B SaaS: under 5% annual churn is excellent, 5-7% is good, above 10% signals a problem. For B2C subscriptions: under 5% monthly churn is solid. For service businesses: churn varies widely, but losing more than 20% of customers annually warrants investigation.
How do you reduce churn?
Start by understanding why customers leave (exit surveys, usage data analysis). Common fixes: improve onboarding, provide proactive support, add value through new features, and address pricing concerns. The highest-impact action is fixing the first 30 days of customer experience.
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