Subscription metrics
Churn rate calculator
Churn is what you lose. The count is easy; the denominator is where everybody disagrees.
Not used in the headline rate. Shown so you can see net movement.
Monthly churn rate
3%
- Retention rate
- 97%
- Annualised churn
- 30.6%
- Compounded over twelve months, not multiplied by twelve.
- Net customer change
- 45
Churn rate = customers lost ÷ customers at the start of the period
The denominator is the argument
There is no single correct churn rate, because there is no agreed denominator. Customers at the start of the period is the classic, and it ignores anybody who joined and left inside the period. Start plus new counts those fast churners and always produces a lower number. Some people use the average of start and end, which is smoother and harder to explain.
This calculator uses customers at the start, which is the most common. Pick one, write it down beside the number, and never change it quietly. A churn rate whose definition moved is worse than no churn rate, because the trend line still looks real.
Why annualised churn is not twelve times monthly
Losing 5% a month does not lose 60% a year. Each month's churn applies to a base that already shrank, so the right arithmetic compounds: one minus 0.95 to the twelfth power, which is about 46%.
Multiplying by twelve overstates churn at every rate, and the error grows as the rate does. At 10% monthly the multiplied figure is 120%, which is not a number that can exist.
Customer churn against revenue churn
This calculator counts customers. Revenue churn counts money, and the two can point in opposite directions: losing ten customers on your cheapest plan is a bad month for customer churn and barely registers in revenue churn, while losing one enterprise account is the reverse.
Net revenue retention goes further and subtracts expansion revenue from existing customers. If upgrades outweigh cancellations it goes above 100%, which is the shape every subscription business wants.
Voluntary and involuntary churn
Voluntary churn is somebody deciding to leave. Fixing it means fixing the product, the price or the fit, which is slow.
Involuntary churn is a card expiring, a bank declining, a payment retrying until the provider gives up. The customer never decided anything. For many businesses it is between a fifth and two fifths of all churn, and most of it is recoverable with better dunning. It is worth measuring separately before you conclude anything about your product.
Questions
- How do you calculate churn rate?
- Divide the customers you lost in a period by the customers you had at the start of it, then multiply by a hundred. Losing 15 of 500 customers is a 3% monthly churn rate.
- How do you annualise a monthly churn rate?
- Compound it, do not multiply it. A 5% monthly churn rate is about 46% a year, not 60%, because each month's loss applies to a base that already shrank. Multiplying by twelve overstates churn at every rate.
- What is a good churn rate for SaaS?
- It depends entirely on who you sell to. Businesses selling to other businesses on annual contracts often sit below 1% a month, while consumer and small-business products commonly run 3% to 7%. Compare yourself to your own trend before comparing to a benchmark.
- What is the difference between customer churn and revenue churn?
- Customer churn counts people and revenue churn counts money, and they can move in opposite directions. Losing ten customers on your cheapest plan is high customer churn; losing one enterprise account is high revenue churn and barely shows in the other.
- What is involuntary churn?
- Churn caused by a failed payment rather than a decision: an expired card, a declined bank, a retry schedule that gives up. It is often a fifth to two fifths of all churn and most of it is recoverable with better dunning.