Quick Definition
Churn rate is the percentage of customers (or revenue) lost during a specific time period. It's one of the most important metrics for subscription businesses.
Interactive tool: Use our Churn Rate Calculator to calculate your rate instantly and compare to benchmarks.
Churn Rate Formula
Customer Churn Rate
Customer Churn Rate = (Customers Lost ÷ Customers at Start of Period) × 100
Example:
- Start of month: 1,000 customers
- Customers who canceled: 50
- Customer Churn Rate: 50 / 1,000 = 5%
Revenue Churn Rate (MRR Churn)
Revenue Churn Rate = (MRR Lost ÷ MRR at Start of Period) × 100
Example:
- Start of month MRR: $100,000
- Lost MRR from churned customers: $7,000
- Revenue Churn Rate: $7,000 / $100,000 = 7%
Net Revenue Churn
Net Revenue Churn = ((MRR Lost - Expansion MRR) ÷ Starting MRR) × 100
This accounts for upgrades and expansion from existing customers. A negative net churn rate means expansion exceeds losses—a sign of strong product-market fit.
Step-by-Step: How to Calculate Churn Rate
Step 1: Choose Your Time Period
Most common:
- Monthly - Standard for SaaS (most useful)
- Quarterly - Good for B2B with longer contracts
- Annual - Big picture view
Step 2: Count Customers at Period Start
This is your baseline. Don't include customers who joined during the period.
Step 3: Count Customers Who Churned
Include:
- Active cancellations
- Failed to renew
- Payment failure cancellations
- Downgrades to free (if applicable)
Step 4: Apply the Formula
Churn Rate = Churned Customers / Starting Customers × 100
Try Our Calculator
Use our Churn Rate Calculator to instantly calculate your churn rate and see how it compares to benchmarks.
Monthly vs Annual Churn Rate
Be careful when comparing rates—they don't convert directly:
| Monthly Churn | Annual Equivalent |
|---|---|
| 1% | 11.4% |
| 2% | 21.5% |
| 3% | 30.6% |
| 5% | 46.0% |
| 7% | 58.0% |
| 10% | 71.8% |
Formula to convert:
Annual Churn = 1 - (1 - Monthly Churn)^12
A 5% monthly churn rate means losing 46% of customers annually, not 60% (5% × 12).
Churn Rate Benchmarks
B2B SaaS
| Rating | Monthly | Annual |
|---|---|---|
| Excellent | < 1% | < 12% |
| Good | 1-2% | 12-22% |
| Average | 2-3% | 22-31% |
| Below Average | 3-5% | 31-46% |
| Needs Improvement | > 5% | > 46% |
B2C Subscriptions
| Rating | Monthly | Annual |
|---|---|---|
| Excellent | < 3% | < 30% |
| Good | 3-5% | 30-46% |
| Average | 5-7% | 46-58% |
| Below Average | 7-10% | 58-72% |
| Needs Improvement | > 10% | > 72% |
By Company Stage
| Stage | Typical Monthly Churn |
|---|---|
| Pre-PMF | 10-15% |
| Post-PMF | 5-8% |
| Growth | 3-5% |
| Scale | 1-3% |
| Enterprise | < 1% |
What's a Good Churn Rate?
There's no universal "good" rate—it depends on:
Business Model
- B2B Enterprise: < 1% monthly
- B2B SMB: 2-3% monthly
- B2C: 5-7% monthly
- Freemium: Higher acceptable for free users
Contract Type
- Monthly contracts: Higher churn is normal
- Annual contracts: Should see lower churn
- Multi-year: Very low churn expected
Price Point
- Low-cost products: Higher acceptable churn
- Premium products: Lower churn expected
Customer Segment
- SMB: Naturally higher churn (businesses close, budgets change)
- Enterprise: Lower churn (longer decisions, sticky products)
Types of Churn Rate
Gross vs Net Revenue Churn
Gross Revenue Churn: Total MRR lost
Gross Churn = Lost MRR / Starting MRR
Net Revenue Churn: MRR lost minus expansion revenue
Net Churn = (Lost MRR - Expansion MRR) / Starting MRR
Negative net churn is the goal—it means existing customers grow faster than others leave.
Logo Churn vs Revenue Churn
| Metric | Best For |
|---|---|
| Logo Churn | Understanding customer satisfaction |
| Revenue Churn | Understanding financial impact |
Example where they differ:
- Lost 10 customers paying $50/month = $500 MRR lost
- Lost 1 customer paying $2,000/month = $2,000 MRR lost
Same logo impact, 4x revenue impact.
Voluntary vs Involuntary Churn Rate
Track these separately:
Voluntary Churn
Customers who actively cancel:
- Product dissatisfaction
- Found alternative
- Budget constraints
- No longer need service
Involuntary Churn
Customers lost due to payment failure:
- Expired credit cards
- Insufficient funds
- Bank declines
Key insight: Involuntary churn represents 20-40% of total churn and is largely recoverable with proper dunning.
Learn more:
How to Lower Your Churn Rate
1. Fix Involuntary Churn First
Easiest win—implement automated dunning:
- Email sequences for failed payments
- SMS notifications
- Pre-authenticated payment links
Recovery rates of 60-80% are achievable.
2. Improve Onboarding
Get customers to value quickly:
- Clear first-use guidance
- Quick wins in first session
- Check-in at day 7, 14, 30
3. Identify At-Risk Customers
Watch for warning signs:
- Declining usage
- No logins in X days
- Support complaints
4. Act on Feedback
- Exit surveys for churned customers
- Regular NPS tracking
- Feature request patterns
5. Consider Annual Plans
Annual contracts reduce churn rate:
- Fewer decision points
- Higher commitment
- Lower effective churn
Common Churn Rate Mistakes
1. Not Excluding New Customers
Customers acquired during the period shouldn't be in the denominator—they didn't have a full period to churn.
2. Ignoring Reactivations
Some "churned" customers come back. Track net churn, not just gross.
3. Comparing Apples to Oranges
Monthly vs annual, B2B vs B2C, SMB vs Enterprise—context matters.
4. Only Tracking One Type
Track both customer churn and revenue churn. They tell different stories.
5. Not Segmenting
Average churn hides insights. Break down by plan, cohort, acquisition source.
Key Takeaways
- Know your formulas - Customer churn ≠ Revenue churn
- Monthly compounds - 5% monthly = 46% annual
- Benchmark appropriately - Context matters
- Track both types - Voluntary and involuntary
- Focus on involuntary first - Easiest to fix
Calculate Your Churn Rate
Use our free Churn Rate Calculator to:
- Calculate customer and revenue churn
- See annual projections
- Compare to benchmarks
- Identify improvement opportunities