How to calculate churn rate
Churn rate is the share of the customers you had at the start of a period who left during it. Count only customers who were there at the start: someone who signs up and cancels in the same month is real churn but belongs to next month’s denominator, or the rate can go above 100% in fast-growing businesses.
- Monthly churn3%
- Retention97%
- Annual churn30.62%
- Average lifetime33.3 months
Monthly churn to annual churn
Monthly churn compounds: each month you lose a share of a shrinking base, so annual churn is 1 − (1 − monthly)¹², not monthly × 12.
| Monthly churn | Annual (compounded) | Monthly × 12 (wrong) | Average lifetime |
|---|---|---|---|
| 1% | 11.4% | 12% | 100 months |
| 2% | 21.5% | 24% | 50 months |
| 3% | 30.6% | 36% | 33.3 months |
| 5% | 46% | 60% | 20 months |
| 7% | 58.1% | 84% | 14.3 months |
| 10% | 71.8% | 120% | 10 months |
Average lifetime is 1 ÷ churn, which is why small churn changes have large value effects. Gupta and Lehmann show the same leverage for retention: at 80% retention and a 12% discount rate, a 1% retention gain lifts customer value by about 3.5%.[3] Put your churn into the customer lifetime value calculator to see the money.
Revenue churn and net revenue retention
Revenue churn measures recurring revenue lost rather than customers lost; net revenue churn subtracts expansion from upgrades. It can be negative when existing customers grow faster than others leave. Public software companies report the mirror image, net dollar retention: CrowdStrike, for example, divides current-period ARR from a customer cohort by that cohort’s prior-period ARR, including expansion and net of contraction and churn.[2] The ARR formula page builds the full ARR bridge, and the MRR calculator sums MRR by plan.
Churn mistakes
- Including new customers in the denominator. Dividing by end-of-month customers understates churn in a growing business.
- Multiplying monthly churn by 12. It overstates annual churn: 5% monthly is 46% a year, not 60%.
- Mixing customer and revenue churn. Losing many small accounts can mean high customer churn and low revenue churn. Track both.
Retention is the complement: 3% churn is 97% retention. If you know the customers at the start and end and the new customers in between, the customer retention rate formula gives retention directly. Keeping customers costs less than replacing them,[1] which is why churn sits next to CAC in every unit-economics review.
Frequently asked questions
How do you calculate churn rate?
Customers lost during the period ÷ customers at the start. 30 ÷ 1,000 = 3%.
How do I convert monthly churn to annual churn?
1 − (1 − monthly churn)¹². 3% monthly = 30.6% a year.
What is net revenue churn?
(Churned MRR + contraction − expansion) ÷ starting MRR. It is negative when upgrades exceed losses.
How is churn related to customer lifetime?
Average lifetime ≈ 1 ÷ churn. 3% monthly churn means about 33 months.