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To calculate your customer churn rate, you divide the number of customers who left during a specific period by the number you had at the very beginning.
It's a straightforward formula, but the percentage it gives you is one of the most vital health indicators for any business with recurring revenue. This isn't just a math problem—mastering this calculation is a fundamental business skill.
Before we jump into the different formulas, we need to be crystal clear on what customer churn—often called customer attrition—really means for your business.
Think of your customer base as a bucket you're trying to fill with water. Every time a customer cancels their subscription or stops buying from you, it's like a new hole appearing in that bucket. For SaaS companies, e-commerce brands, and anyone else relying on repeat business, that leaky bucket is everything.
A high churn rate is a massive red flag. It’s a signal that something is wrong—it could be your product, your pricing, your customer service, or even your positioning in the market.
On the flip side, a low churn rate is a sign of happy, loyal customers. It means you can shift your focus from frantically replacing lost business to actively growing and scaling. If you want to dig deeper into the nuances, we break it all down in our detailed guide on customer attrition.
Churn isn't just about losing a customer count; it's a direct hit to your financial stability. A seemingly small monthly churn rate can compound over time, creating a serious drag on your growth.
It directly impacts your most important financial metrics:
The simplest way to think about customer churn rate is to compare who you lost to who you started with. For instance, if you started the month with 100 customers and ended with 90, you lost 10. Just divide the 10 customers lost by the initial 100, and you get a churn rate of 10%.
You can’t get an accurate churn rate with messy data. It’s that simple. Before you even think about plugging numbers into a formula, your first job is to pull together the right information from all your systems—whether that’s your CRM like HubSpot, a payment processor like Stripe, or your own customer database.
The old saying "garbage in, garbage out" is the absolute rule here. If you’re working with inconsistent customer IDs, wrong subscription dates, or missing cancellation details, your results will be completely skewed. This isn't just a minor error; it's the kind of thing that leads to terrible business decisions. Taking the time to clean and standardize your data isn't optional—it's step zero.
Next, you need to get crystal clear on what a "churned customer" actually means for your business. This definition directly impacts which numbers you use in your calculation, so you have to be consistent.
Ask yourself and your team these questions:
There isn’t a universal right answer here, but you absolutely have to pick a definition and stick with it. This is the only way to make sure your churn rate is measured the same way over time, which lets you spot real trends. Segmenting this data is also a powerful way to understand why different groups leave, a concept we dig into in our guide to customer cohort analysis.
Your core data checklist should include the total number of active customers at the beginning of your chosen period (e.g., the first day of the month) and the total number of customers who canceled their subscriptions during that same period.
Once you have these two clean data points and a firm definition of churn, you're ready to start calculating.
Alright, let's get our hands dirty. The most straightforward way to figure out your customer churn is with the classic formula: (Customers Lost / Customers at Start of Period) x 100. This calculation gives you a clean percentage of the customers who walked away during a specific timeframe.
Let's run through a quick example. Say your SaaS company, "Innovate Inc.," kicked off the month of April with 500 active subscribers. Over the course of the month, 25 of those customers decided to cancel.
To get your monthly churn rate, you'd do this quick bit of math:
Just like that, Innovate Inc. has a customer churn rate of 5% for April. This number is now a critical benchmark you can track month over month. While it seems simple, this calculation is one of the 7 essential SaaS metrics that every founder should have on their dashboard.
This visual breaks down the basic formula perfectly.
Seeing it laid out like this really highlights the only two data points you need to get started: your customer count at the beginning of the period and the number of cancellations that happened within it.
The standard formula is great for businesses with a relatively stable customer base. But what happens during periods of high growth? It can actually be a bit misleading.
If you’re adding a ton of new customers during the month, that starting count doesn't really represent the average number of customers who could have churned.
In high-growth situations or when your customer count fluctuates a lot, the basic formula can skew your perception. That's when a more nuanced, adjusted churn rate formula comes into play to paint a more accurate picture.
This adjusted method, (Churned Customers) ÷ [(Initial Customers + Final Customers) ÷ 2] × 100, provides a much more balanced view by using the average number of customers during the period.
For instance, if you start with 300 customers, lose 100, but also add enough new ones to end with 200, the adjusted rate is 40%. The traditional method would have given you 33.3%, a figure that doesn't quite capture the reality of the turnover you experienced.
Knowing your customer churn rate is a solid start, but it doesn't paint the whole picture. Let's be real: losing a small startup on your basic plan isn't the same gut punch as losing an enterprise client paying you ten times more. This is exactly why you need to be calculating revenue churn. It gives you a much clearer, more honest look at your company’s financial health.
Focusing on revenue instead of just customer counts helps you grasp the true monetary impact of churn. It cuts through the noise and shows you whether you're losing high-value accounts or just those on lower-tier plans. That insight is mission-critical for deciding where to focus your retention efforts and for understanding if your business model is truly sustainable.
The most straightforward version of this metric is Gross Revenue Churn. This simply measures the total monthly recurring revenue (MRR) you lost from customers who canceled or downgraded their subscriptions in a given period. Think of it as the total amount of money that walked out the door.
This is a powerful variation on the simple customer churn rate because it's all about the financial impact. For instance, if your company has a monthly recurring revenue (MRR) of $100,000 and you lose $5,000 in revenue from cancellations, your gross revenue churn is 5%. This metric is especially vital in markets where subscription tiers vary wildly. Losing a few high-value customers can hurt way more than losing a bunch of smaller ones. You can find more detailed examples of how churn formulas work on Amplitude.com.
But what about the revenue you gained from your existing customers? This is where Net Revenue Churn comes in, and it takes the analysis to a whole new level. It starts with your gross revenue churn but then subtracts any new revenue you generated from current customers through upgrades or add-ons. We call this expansion MRR.
Net Revenue Churn = (MRR Lost from Churn & Downgrades) - (Expansion MRR from Existing Customers)
This metric reveals the true momentum of your customer base. If your expansion revenue from happy, growing customers is greater than the revenue you're losing from churn, you can actually achieve negative net revenue churn. This is the holy grail for subscription businesses. It means your existing customers are growing faster than your churned ones are leaving, creating a powerful engine for growth.
Understanding this metric is also a key component when you calculate customer lifetime value (CLTV) and try to forecast your long-term growth trajectory.
So you've calculated your churn rate. That's a great first step, but the number itself is only half the story. The real value comes from understanding what that percentage is telling you about your business. A question I hear all the time is, "Is my churn rate good?"
While industry benchmarks can give you a rough idea, they don't tell the whole story. Context is everything.
For instance, an acceptable monthly churn for a B2B SaaS company selling to large enterprises might be just 1-2%. But a B2C subscription box with a much broader audience might find rates closer to 5-7% perfectly normal. Your business model, market, and price point all play a huge role.
A single month's churn rate is just a snapshot in time. The real insights come from tracking trends. Is your churn creeping up quarter-over-quarter? Did you see a sudden spike after a price change or a new feature release? This is how churn transforms from a simple metric into a powerful diagnostic tool.
To find truly actionable insights, you have to segment your churn data. Don't just settle for the overall number; you need to break it down to see the patterns hiding beneath the surface. This is where you can uncover some surprising truths about where you're leaking customers.
For example, try segmenting your churn by:
By isolating these variables, you move beyond just knowing your churn rate to understanding why customers are leaving. This deep analysis is the foundation of effective retention strategies and is crucial for holistic revenue analytics.
Analyzing churn this way connects directly to optimizing your business for growth. To get the complete picture, check out our guide on advanced revenue analytics and see how churn fits into your company's overall financial health.
After you've run the numbers for the first time, a few questions always seem to pop up. Teams getting serious about tracking churn want to make sure they're doing it right, and getting these details ironed out ensures everyone is on the same page.
Let’s clear up some of the most frequent points of confusion I see.
The big question is always about timing—what's the right rhythm for calculating your churn rate?
For most SaaS and subscription businesses, monthly calculation is the gold standard. It gives you a regular pulse on customer retention without making you overreact to small, day-to-day blips. Think of it as a reliable heartbeat monitor for your business—frequent enough to catch problems early, but stable enough to reveal real trends.
That said, don't just stop at monthly. You should also be looking at churn quarterly and annually. These longer timeframes let you zoom out and spot the bigger patterns that might be hiding in the month-to-month noise.
On the flip side, very early-stage startups might even track churn weekly. When you're still dialing in product-market fit or fixing a leaky onboarding process, that high-frequency feedback is invaluable.
It’s also incredibly important to remember that not all churn is created equal. The "why" behind a customer leaving is everything.
You absolutely have to track these two types separately. The solutions couldn't be more different. You fix voluntary churn by making your product and service better. You fix involuntary churn with smarter dunning management and payment recovery systems.
A shocking amount of churn—often 20-40% for subscription companies—is involuntary. Ignoring it is like leaving a pile of easy money on the table.
This is a fantastic question, and it gets right to the heart of what real, sustainable growth looks like.
Technically, your customer churn rate cannot be negative. It’s just not possible to lose a negative number of customers.
However—and this is a big one—your net revenue churn rate absolutely can be negative. This happens when the new revenue you gain from your existing customers (through upgrades, add-ons, and cross-sells) is greater than the revenue you lost from the customers who canceled in that same period.
Achieving negative net revenue churn is the holy grail for subscription businesses. It's a powerful sign of a healthy, scalable company with a truly loyal customer base that's growing with you.
Ready to stop guessing and start knowing exactly which marketing efforts are driving your most valuable customers? Cometly provides the clear, accurate attribution you need to reduce churn and maximize ROI. Get started with Cometly today.
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