Churn rate

What is churn rate?

Churn rate is the percentage of customers, subscribers or revenue that a business loses during a given period, usually a month, a quarter or a year. It is the mirror image of retention: a business that keeps 95% of its customers each month has a monthly churn rate of 5%. For subscription companies, SaaS products and any model built on repeat purchases, churn is one of the first numbers to watch, because it directly caps how far growth can go.

Churn matters because acquiring a customer costs far more than keeping one. A leaky base forces the team to spend more on acquisition just to stay level, and it quietly erodes customer lifetime value. Even a one-point difference in monthly churn changes the expected lifetime of a customer by years.

How to calculate churn rate

The standard formula divides the customers lost during the period by the customers present at the start of that period.

• Customer churn rate = customers lost during the period / customers at the start of the period x 100
• Revenue churn rate = recurring revenue lost / recurring revenue at the start x 100

Example: a company starts the month with 400 subscribers and loses 20. Its monthly churn rate is 20 / 400 = 5%. Customers acquired during the month are excluded from the calculation, otherwise the result is artificially lowered. To project the effect over a year, remember that churn compounds: 5% a month means roughly 46% of a cohort is gone after twelve months.

Types of churn

• Customer (logo) churn: the number of accounts that cancel or do not renew.
• Gross revenue churn: recurring revenue lost from cancellations and downgrades, before any expansion.
• Net revenue churn: gross churn minus upsell and cross-sell revenue from existing customers. It can be negative when expansion outweighs losses.
• Voluntary churn: the customer actively decides to leave.
• Involuntary churn: the customer leaves by accident, for instance after a failed card payment.

Churn rate vs retention rate vs LTV

Common causes and how to reduce churn

Churn usually has a small number of root causes: a weak onboarding that never gets the customer to a first result, a product that does not fit the real need, price perceived as too high for the value, poor support, or a competitor offering a better deal. Start by segmenting churn by cohort, plan, acquisition channel and customer size, because the average hides where the problem sits.

• Improve onboarding so customers reach their first win quickly.
• Track usage signals and contact accounts whose activity drops before they cancel.
• Run exit surveys and cancellation flows to learn why people leave.
• Fix involuntary churn with card updaters and payment retry rules.
• Offer annual plans, pauses or downgrades as alternatives to cancelling.

What is a good churn rate?

There is no universal benchmark. Consumer subscriptions often live with monthly churn of 5% to 8%, while B2B software aims for roughly 1% to 2% a month, and enterprise contracts are lower still. Compare your figure with your own history and your segment, and always read it next to acquisition cost and lifetime value.

Churn rate at BeBranded

At BeBranded, we treat churn as a strategic signal, not just a dashboard number. Our team helps companies define the right retention KPIs, map the customer journey and prioritise the changes that keep customers longer. Discover our approach on the consulting service page.