Compare churn rate and retention rate: how they relate, how to calculate each, and which metric to focus on.
Churn rate measures the percentage of customers or revenue lost in a given period. It is a risk and loss metric ; investigate the reasons for losses before attributing them to product value.
Compare losses with previous periods and appropriately matched benchmarks.
Retention rate measures the percentage of customers or revenue kept over a period. It is a health and sustainability metric ; it shows customers stayed, but does not by itself explain why.
Review customer retention alongside revenue retention and customer feedback.
Customer churn and retention sum to 100% when they track the same starting group over the same period with matching definitions.
Retention Rate = 100% - Churn RateChurn Rate = 100% - Retention RateExample: 3% monthly churn = 97% monthly retention. 85% annual retention = 15% annual churn.
Churn Rate = (Customers Lost in Period / Customers at Start of Period) x 100Example: Started month with 1,000 customers, lost 25. Churn Rate = (25 / 1,000) x 100 = 2.5%
Retention Rate = (Starting Customers Still Active at End / Customers at Start) x 100Example: 1,000 start, 1,050 end, and 75 new customers still active at the end, with no reactivations. Retained = 1,050 - 75 = 975. Retention = (975 / 1,000) x 100 = 97.5%.
Revenue Churn = ((MRR Lost to Cancellations + Downgrades) / Starting MRR) x 100Example: $50,000 starting MRR, $2,000 cancellations, $500 downgrades. Revenue Churn = ($2,500 / $50,000) x 100 = 5%.
NRR = (MRR Start + Expansion MRR - Churned MRR - Contraction MRR) / MRR Start x 100NRR above 100% means revenue from the starting customer group grew after expansion and losses.
| Criteria | Churn Rate | Retention Rate |
|---|---|---|
| What It Measures | Percentage of customers or revenue lost | Percentage of customers or revenue kept |
| Relationship | Churn = 100% - Retention | Retention = 100% - Churn |
| Direction | Lower is better | Higher is better |
| Monthly example | 3% customer churn | 97% customer retention |
| Annual example | 15% customer churn | 85% customer retention |
| Types | Customer churn, revenue churn, voluntary vs involuntary | Customer retention, net revenue retention (NRR) |
| Can Exceed 100%? | Customer and gross revenue churn: 0-100%; net revenue churn can be negative | Yes, for NRR (expansion drives this) |
| LTV Impact | Revenue LTV = monthly ARPA / monthly customer churn (decimal), assuming constant inputs | Lower constant churn raises estimated LTV when other inputs stay fixed |
| Primary Action | Identify and prevent cancellations | Deliver ongoing value and expand accounts |
Logo / Customer Churn
Percentage of customers (accounts) that cancelled. The simplest measure of retention health but ignores the revenue size of those customers.
Gross Revenue Churn
Percentage of starting MRR lost to cancellations and downgrades. It captures revenue losses that customer counts alone do not show.
Net Revenue Retention (NRR)
Revenue retained from a starting customer group, including expansion. NRR can exceed 100% even when some customers leave.
Involuntary Churn
Churn caused by payment failures rather than a decision to cancel. Measure its share in your own data and test payment retries or reminders.
Including new customer acquisitions in the churn denominator
Churn should be calculated against customers at the start of the period. Customers acquired mid-period who cancel immediately should not distort the base churn calculation.
Conflating customer churn with revenue churn
In a tiered pricing model, 10% customer churn from the lowest tier may represent only 3% revenue churn. Always report both and explain which you are referencing.
Using monthly churn to estimate annual churn by simple multiplication
Annual churn is not simply monthly churn x 12. A 2% monthly churn compounds to approximately 21% annual churn, not 24%. Use the compound retention formula: Annual Churn = 1 - (1 - Monthly Churn)^12.
Ignoring involuntary churn as a separate category
Separate payment failures from deliberate cancellations so you can choose an appropriate follow-up and measure recovery.
Use our free calculators to measure churn rate, retention rate, and analyze cohort retention curves with detailed breakdowns by customer segment.
Customer churn and retention add to 100% when they use the same starting customer group, period, and definition of leaving. A 3% monthly churn rate then means 97% retention; 85% annual retention means 15% annual churn. Revenue measures need matching definitions too: compare gross retention with gross churn, or net retention with net churn.
Compare benchmarks for the same customer segment, billing model, and period. ChartMogul’s SaaS Billing Report 2025 reports 2024 median annual customer retention of 41% for monthly-plan cohorts below $25 ARPA and 65% at $1,000+ ARPA. These correspond to 59% and 35% annual churn. Its chart excludes companies below $300,000 ARR and those offering only one billing model.
Customer churn counts lost customers from the starting group. Gross revenue churn measures recurring revenue lost to cancellations and downgrades. Losing a few large accounts can produce high revenue churn despite low customer churn. Downgrades also affect the comparison, so inspect both measures and their components.
NRR measures recurring revenue retained from a starting customer group after expansion, cancellations, and contraction. It can exceed 100% when expansion exceeds losses. Customer retention cannot exceed 100% for a fixed starting group. NRR growth describes that cohort’s revenue, not its customer count or total-company growth.