Glossary
What is churn rate?
Churn is what you lose. Customers who cancel, or the revenue they took with them, over a period. Churn rate expresses that loss as a fraction of what you had.
The count is easy. The rate is where everybody disagrees.
The denominator is the argument
There is no single correct churn rate, because there is no agreed denominator.
| Denominator | What the rate then means |
|---|---|
| Customers at the start | The classic. Ignores anybody who joined and left inside the period |
| Start plus new | Counts fast churners. Always a lower number |
| Average of start and end | Smoother, harder to explain |
| MRR at the start | Revenue churn, not customer churn. A different metric |
All four are defensible and all four give different numbers. Pick one, write it down beside the code, and never change it quietly. A churn rate whose definition moved is worse than no churn rate, because the trend line still looks real.
Customer churn against revenue churn
They answer different questions and can point in opposite directions.
Customer churn counts people. Losing ten customers on your cheapest plan is a high customer churn month.
Revenue churn counts money. Losing one enterprise account is a high revenue churn month and barely registers in customer churn.
Net revenue churn subtracts expansion revenue from existing customers. If upgrades outweigh cancellations it goes negative, which is the shape every subscription business wants and most never reach.
Reporting one and calling it "churn" without saying which is how two people in the same company end up arguing about a number they both read correctly.
Voluntary and involuntary churn
The distinction that is actually actionable.
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 20% to 40% of all churn, and it is mostly recoverable with better dunning.
They also arrive at different speeds. Involuntary churn lags the failure that caused it by however long your retry schedule runs, so changing that schedule moves your churn series with no change in customer behaviour at all.
When a cancellation counts
A subscription cancelled with the period left to run is still paying. Count it on the day somebody clicked and churn spikes while revenue does not move for a year. Count it when the subscription actually ends and today's churn tells you nothing about today's cancellations.
The second lines up with your active subscriber count, which is why it is the better default.
Churn in Notch Metrics
Three connectors report it as a count, bucketed by when the subscription ended: Stripe, Polar and Paddle.
A count rather than a rate, deliberately. The denominator everybody means by "churn rate" differs by company, and guessing which one you meant would produce a number you could not defend.