What is Churn Rate?
Churn Rate is the percentage of customer accounts or recurring revenue lost during a given period. Customer churn divides cancelled accounts by accounts at the start of the period. Revenue churn divides lost recurring revenue by starting recurring revenue. Because churn compounds over time, even a modest monthly rate can reduce a customer base substantially over a year. Track customer churn and revenue churn separately.
Formula
Churn Rate = (Customers Lost / Customers at Start of Period) x 100%Monthly Customer Churn Example: 10 cancellations from 500 starting customers = 2% monthly churn. Annual equivalent: 1 - (1 - 0.02)^12 = 21.5% annual churn. Revenue Churn (Gross): (MRR Lost from Cancellations + Downgrades) / Starting MRR x 100%. Net Revenue Churn subtracts expansion MRR from the numerator.
Benchmarks and interpretation
- ChartMogul's 2025 SaaS Billing Report found 2024 annual customer-retention medians from 41% for comparable monthly-plan companies below $25 ARPA to 69% for the $500-$1,000 ARPA band
- The ChartMogul report covers 2,500 SaaS companies; this retention chart excludes companies below $300,000 ARR and those with only one billing model; it is not a monthly churn table
- Compare customer churn or revenue churn only with the same population, definition, and period
- Negative net revenue churn means revenue from existing customers grew after expansion, contraction, and churn
When to use Churn Rate
- Diagnosing the health of customer retention before it compounds into a growth crisis
- Calculating the maximum sustainable CAC given current LTV implied by churn rate
- Identifying cohorts or segments with anomalously high churn to prioritise product investment
- Modelling the revenue impact of a 1-point churn reduction to build the business case for retention programs
- Tracking only customer churn and ignoring revenue churn, which can be higher or lower depending on which plan tiers are churning
- Measuring churn on a quarterly or annual basis, which masks within-period acceleration
- Using net churn (after new activations) instead of gross churn, which conceals true cancellation rates
- Cohort churn analysis - group customers by acquisition month - reveals whether recent customers churn faster than older ones, a leading indicator of product or ICP problems
- Voluntary churn (cancellations) and involuntary churn (failed payments) require completely different interventions
- Track churn by customer segment, plan, and acquisition channel to find which customers need the most retention investment
Related terms
Free Churn Rate Calculator
Enter your inputs in the free Churn Calculator and review the result alongside its guidance.