What Is Churn Rate?
TL;DR
Churn rate is the share of customers, or of recurring revenue, lost during a period. It is calculated by dividing the number lost in the period by the number present at the start of that period. Customer churn and revenue churn are separate figures and often move in opposite directions.
How is churn rate calculated?
Divide the number lost during the period by the number present at the start of it. Customers acquired inside the period are normally excluded from both halves, because a cohort that had only part of the period in which to churn distorts the result.
The period has to be stated alongside the figure. A monthly rate and an annual rate are not interchangeable, and compounding a monthly rate across twelve months overstates the annual loss.
What is the difference between customer churn and revenue churn?
Customer churn counts accounts and revenue churn counts money. A month in which four small accounts leave and one large one renews produces high customer churn with low revenue churn, and the reverse happens the month a single large account leaves.
Both are worth carrying. Customer churn tells you whether the product works for the segment being sold to, and revenue churn tells you what the answer costs.
Why does the denominator matter so much?
Because a fast-growing business can report a falling churn rate while losing more customers than it ever has. The denominator grows every month, so the ratio drops even as the count rises, which is why the absolute number of losses is reported next to the rate.
The same trap runs the other way when growth stalls. A flat denominator makes an unchanged loss count look like rising churn, and the operating response to those two situations is not the same.
Frequently asked questions
A period in which expansion revenue from existing customers exceeds the revenue lost from those leaving, so net revenue retention comes out above one hundred percent. It is a property of the upsell motion rather than of the churn figure itself.