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Intermediate

What is churn

Also known as: churn rate, customer churn, logo churn, customer attrition, monthly churn rate, how to calculate churn

Definition

Churn is the share of customers, or of recurring revenue, lost in a period: those who left in a month divided by those at its start. 5% a month is 46% a year.

Why it matters

Churn quietly drains a recurring revenue business.

Common mistakes

Confusing customer churn, which counts accounts, with revenue churn, which counts money.

Related terms

Worked exampleIllustration

A meal subscription loses 10 customers in a month

A meal subscription service, one month, amounts excluding VAT.

  1. Customers at the start of the month, paying ₪30,000 of MRR together.

    200

  2. 10 of them cancel. Customer churn = 10 ÷ 200.

    5%

  3. All 10 were on the ₪100 plan, so ₪1,000 of MRR was lost. Revenue churn = 1,000 ÷ 30,000.

    3.3%

  4. If 5% leave every month, 200 × 0.95^12 of the original customers remain after a year.

    about 108

  5. Annual churn = 1 - 0.95^12, not 5% × 12 = 60%.

    about 46%

  6. Customers who joined and left within the month are counted in neither number.

One month, two honest churn numbers, and a yearly figure far worse than the monthly one sounds.

Illustration

Small monthly churn, a big yearly loss

Month 12: 108 of 200 leftMonth 12: 108 of 200 left
  • Still a customer
  • Left

At 5% a month, 108 of 200 customers are left after 12 months. Over a year that is 46% churn, not 60%. To stay at 200, you need about 10 new customers every month.

Each dot is one of the meal subscription's customers. The same share leaves every month, so the loss compounds.

Definition

Churn, or churn rate, is the share of customers who left during a period, divided by the customers you had at its start. Customers who joined and left within the same period count in neither number. Customer churn, also called logo churn, counts accounts. Revenue churn counts the recurring revenue lost, including downgrades, and the two can differ, because small accounts that leave are a bigger share of customers than of revenue. Retention is the mirror number, 100% minus churn. Monthly churn compounds: annual churn is 1 minus (1 minus monthly churn) to the power of 12, so 5% a month is about 46% a year, not 60%. Churn can be voluntary, a customer who chose to leave, or involuntary, a card that failed. A business without subscriptions can measure it too: choose a window, for example six months without a visit for a salon client, and count those customers as lost.

Why it matters

With high churn you must keep winning customers just to stay flat, so growth becomes expensive. Because it compounds, a monthly rate that sounds small removes a large part of the base within a year. Churn is also the denominator of LTV, so it decides how much each customer is worth and how much you can spend to win one.

Directly related: MRR, ARR, NRR.

Formula

Churn Rate = (Customers Lost during Period / Customers at Start of Period) * 100

Improvement tips

  • Find when customers leave most, in the first month, after a price change or at renewal, and fix that moment first.
  • Ask every customer who leaves one question: what made you go? Patterns show up after a few answers.
  • Contact customers whose use is dropping, before they cancel.
  • Treat involuntary churn separately. Card update reminders and automatic payment retries keep customers who never meant to leave.

Common mistakes

  • Multiplying monthly churn by 12. Annual churn is 1 minus (1 minus monthly churn) to the power of 12.
  • Ignoring involuntary churn from expired cards and failed payments.
  • Counting customers who joined and left in the same month, which inflates the rate.

Related terms

FinanceIntermediate

MRR

MRR (monthly recurring revenue) is what active subscriptions and retainers are worth per month, without one off fees. 40 members at ₪350 is ₪14,000 MRR.

FinanceIntermediate

ARR

ARR (annual recurring revenue) is the yearly value of the recurring subscriptions and contracts active today, usually MRR × 12. A snapshot, not a forecast.

FinanceAdvanced

NRR

NRR (net revenue retention) is the share of last year's recurring revenue the same customers pay now, upgrades and cancellations included. Over 100% is growth.

TechnologyBeginner

SaaS

SaaS (Software as a Service) is software you rent by subscription and use in a browser or an app, with nothing to install. The vendor hosts and updates it.

FinanceIntermediate

LTV

LTV (customer lifetime value) is the gross profit one customer brings over the whole relationship. You compare it with the cost of winning that customer (CAC).

FinanceAdvanced

LTV:CAC

LTV:CAC is the ratio of the gross profit a customer brings over the relationship (LTV) to what it cost to win them (CAC). 3:1 is a common SaaS rule of thumb.

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Quick check

A business loses 5% of its customers every month. About how many of 100 customers remain after a year?

Choose an answer

Frequently asked questions

Do I need to understand churn before starting a subscription business?
Yes. Every growth plan depends on how many customers stay, and the churn assumption in a business plan shows how many new customers you need just to stay flat.
When does churn first become relevant for a new business?
As soon as customers can cancel or simply stop buying. Measure it from the first months, when the reasons for leaving are easiest to fix.
How do I estimate churn for my business plan?
Use your own early numbers as soon as you have them, and test the plan at several rates. Published benchmarks come mostly from software companies and differ by period and method, so no single target fits every business.
How does churn affect the long term survival of a business?
High churn caps growth. At some point all new sales only replace the customers who left, and the business stops growing however much it spends on marketing.
Why does churn matter for a business already running?
It shows how well the service keeps customers. Because it compounds, a small monthly rate removes a large part of the base within a year.
What goes wrong when a business ignores churn?
It becomes a leaky bucket: marketing pours new customers in while existing ones drain out of the bottom, and the money spent on winning them leaves with them.
How do I track churn without stopping day to day work?
At month end, divide the customers who cancelled by the customers you had at the start. A subscription tool does it automatically. Without subscriptions, count the customers with no purchase in a window you choose.
How can a business owner reduce churn?
Fix the moment customers leave most, often the first month, ask departing customers why, fix failed payments, and reach quiet customers before they cancel.
What does churn mean in plain words?
It is how many of your customers stop buying from you in a period, such as a month, as a share of those you had. If 100 customers start the month and 5 leave, churn is 5%.
Is churn complicated to calculate?
No, it is one division. The care is in the rules: the same period every time, and customers who joined and left in the same month counted in neither number.
Do I need an accountant to track churn?
No. Churn comes from your customer list or your subscription tool, not from the books.
What is the difference between customer churn and revenue churn?
Customer churn counts the accounts you lost. Revenue churn counts the recurring money you lost, downgrades included. Ten small accounts can be 5% of customers and only 3.3% of revenue, and when upgrades outweigh losses, revenue churn can even turn negative.

Sources: ChartMogul, Churn basics and benchmarks, chartmogul.com blog, read September 2026

Last reviewed: 2026-09-23

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