What is churn rate and how do you calculate it?
Churn rate is the share of customers or recurring revenue you lose over a period. Here are the formulas, how to convert monthly churn to annual, a worked SAR example, and how churn changes lifetime value and CAC payback.
Churn rate is the percentage of customers, or recurring revenue, that a business loses over a period, out of what it had at the start of that period. If you begin a month with 1,000 subscribers and 30 cancel, monthly churn is 3%. It is the mirror image of retention, and it caps how much growth your marketing can add.
How do you calculate churn rate?
| Measure | Formula |
|---|---|
| Customer churn rate | Customers lost in the period ÷ customers at the start × 100 |
| Revenue churn rate | Recurring revenue lost to cancellations and downgrades ÷ recurring revenue at the start × 100 |
| Annual churn from monthly | 1 − (1 − monthly churn) ^ 12 |
Leave customers won during the period out of both numbers. Otherwise a strong sales month hides a retention problem.
Churn rate example
An illustrative Saudi software company starts a quarter with 800 customers and 48 cancel, so quarterly churn is 6%, about 2% a month. Over a year, 2% monthly churn compounds to 21.5%, not 24%.
Churn drives lifetime value. With average revenue of SAR 400 a month per customer and an 80% gross margin:
| Monthly churn | Average lifetime | Lifetime gross profit |
|---|---|---|
| 2% | 50 months | SAR 16,000 |
| 3% | 33 months | SAR 10,667 |
One extra point of churn cuts lifetime value by a third, and with it how much you can afford to spend acquiring each customer.
Pitfalls
- Voluntary and involuntary churn differ: failed payments need billing fixes, not marketing.
- Averages hide cohorts: customers from one campaign or channel may churn far faster than others.
- Customer and revenue churn diverge: losing many small accounts hurts less than losing one large one.
Related terms
See customer retention rate, customer lifetime value and CAC payback period.
How Grower helps
Grower connects HubSpot and Mailchimp alongside your ad channels, and campaign groups let you run retention work with its own objective, budget and target personas. Our B2B SaaS page covers the acquisition side of the equation.
Frequently asked questions
What is the difference between churn rate and retention rate?
Churn rate is the share of starting customers you lost during a period. Retention rate is the share you kept. Measured on the same starting group, without counting new customers, the two add up to 100%. A 12% annual churn rate means an 88% retention rate for that year.
What is a good churn rate?
It depends on your business model, price point and contract length. Monthly consumer subscriptions usually churn faster than annual business contracts. Rather than chasing an outside benchmark, track your own churn by cohort and acquisition channel over time, and check that lifetime value still covers what you pay to acquire each customer.
How does churn affect CAC payback?
CAC payback is the number of months a customer takes to repay what you spent acquiring them. If customers churn before that point, you lose money on them. Higher churn means fewer customers survive long enough to pay back, so a channel that looks efficient on cost per acquisition can still lose money.
See how churn changes the time it takes to earn back acquisition costs with the free CAC payback calculator.