Churn Rate

The percentage of customers, or revenue, you lose in a given period.

When to use this

Use churn to track customer and recurring-revenue losses. Choose a period suited to the billing model and compare it consistently. Churn affects simple LTV estimates but does not enter the basic gross-profit CAC payback formula directly.

Limits

Subscription churn is not the same as repeat purchasing in a one-time-purchase business. Short histories can be measured, but they give limited evidence about long-term retention. Define when a customer is considered lost before comparing periods.

Inputs

Customers at start of period: logo count on day 1.
Customers lost during period: cancellations plus downgrades to free, if you have a freemium tier.
MRR at start of period: total recurring revenue on day 1.
MRR lost during period: cancellations plus contraction.
Expansion MRR (for net): upgrades and seat additions from existing customers.

The math

Customer churn (%) = lost starting customers / starting customers x 100
Gross revenue churn (%) = (churned MRR + contraction MRR) / starting MRR x 100
Net revenue churn (%) = (churned MRR + contraction MRR - expansion MRR)
                        / starting MRR x 100

Use the starting customer cohort for revenue movements. Customer churn counts lost accounts; revenue churn also captures the size of losses and, where included, downgrades.

A worked example

A B2B SaaS starts Q1 with 400 customers and $200k MRR. Over the quarter they lose 12 customers totaling $8k MRR. They get $3k in expansion from existing accounts.

Customer churn        = 12 / 400          = 3%
Gross revenue churn   = $8k / $200k       = 4%
Net revenue churn     = ($8k - $3k) / $200k = 2.5%

Gross revenue churn is 4%, above customer churn of 3%. In this example, where the $8,000 is all cancellations, lost accounts had higher average MRR than the starting customer base. Expansion offsets part of that loss, bringing net revenue churn to 2.5%.

In PM Toolkit

The calculator reports customer and revenue losses from the inputs supplied. Expansion can offset gross losses in the net measure. Review both so expansion does not hide worsening retention.

Common mistakes

Reporting net revenue churn without the gross losses behind it.
Comparing monthly and annual rates directly. Compounding a monthly rate assumes it remains constant.
Ignoring downgrades. A move from $500 to $50 per month is $450 of contraction, even if the customer remains.
Comparing different billing models, contract values, or customer cohorts without qualification.

Benchmarks (illustrative)

Use the sourced churn and retention comparisons. ChartMogul's 2025 report provides historical annual customer retention by ARPA and billing model; those observations are not universal monthly churn targets. Match the definition and period before comparing.