Churn Rate Calculator: Customer and Revenue Churn
Learn how to calculate churn rate from the customers and recurring revenue you had at the start of a period and what you lost. You also get retention, average customer lifetime and the churn rate annualised, so monthly and quarterly figures compare fairly.
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Formula
Customer churn = customers lost ÷ customers at startRevenue churn = recurring revenue lost ÷ recurring revenue at startRetention = 1 − customer churnAverage lifetime = 1 ÷ customer churn(in periods; multiply by the period length for months)Annualised churn = 1 − (1 − churn)^(12 ÷ period months)
Worked example
500 customers at the start, 25 lost: churn 25 ÷ 500 = 5%, retention 95%. Revenue 50,000 with 3,000 lost: revenue churn 6%. Average lifetime is 1 ÷ 0.05 = 20 months for a monthly period. Annualised: 1 − 0.95^12 = 45.96%.
Revenue churn here is gross: it counts cancellations and downgrades only, not upgrades or new customers. Lifetime assumes a constant churn rate.
Another example
A quarterly period (3 months): 1,200 customers at the start and 36 lost. Churn is 36 / 1,200 = 3% per quarter and retention is 97%. The average lifetime is 1 / 0.03 = 33.3 quarters, which is 100 months. Annualised, that is 1 − 0.97^4 = 11.47% a year.
Rules of thumb
Healthy churn depends on the product and customer size. Small-business and consumer subscriptions often see roughly 3% to 7% a month, while larger business contracts are often judged on annual churn in the low single digits. Compare with your own trend first.
Common mistakes
- Dividing by customers at the end of the period instead of the start.
- Counting customers who joined during the period among the losses or the base.
- Multiplying monthly churn by 12. Compound it: 5% monthly is 45.96% a year, not 60%.
- Comparing churn across different period lengths without annualising.
How it differs
Churn rate feeds the customer lifetime value calculator, where lifetime is 1 divided by churn. The MRR and ARR calculator tracks churned MRR alongside new and expansion revenue, so it shows growth rather than the loss rate itself.
Frequently asked questions
How do you calculate churn rate?
Customer churn is customers lost divided by customers at the start of the period. Losing 25 of 500 customers is 25 ÷ 500 = 5%, and retention is 100% − 5% = 95%.
What is revenue churn and how does it differ?
Revenue churn is recurring revenue lost to cancellations and downgrades divided by revenue at the start. Losing 3,000 of 50,000 is 6%. It is gross churn, so it ignores upgrades and new sales, and it can differ from customer churn when bigger or smaller customers leave.
How is average customer lifetime calculated?
Average lifetime is 1 ÷ churn rate, in the same periods as the churn. At 5% monthly churn that is 1 ÷ 0.05 = 20 months. It assumes a constant churn rate, which new businesses rarely have. With zero churn the lifetime is unbounded, so with no lost customers churn shows 0% and the lifetime is shown as 0 with a note.
How do you annualise churn?
Compound the retention rate rather than multiplying: annual churn = 1 − (1 − churn)^(12 ÷ period months). 5% monthly churn is 1 − 0.95^12 = 45.96% a year, not 60%. A quarterly churn of 10% becomes 1 − 0.9^4 = 34.39%.
What is a good churn rate for SaaS?
As a rough rule of thumb, monthly churn of 1% to 2% is strong for business software and 3% to 7% is common for small-business or consumer subscriptions. Annual churn under 10% is often seen as good for contract-based business software. Your own trend and customer segment matter more than any benchmark.
How do I calculate churn rate in Excel?
Use =customers_lost / customers_at_start and format the cell as a percentage. 25 lost from 500 at the start gives =25/500 = 5%. For annual churn from a monthly figure use =1-(1-monthly_churn)^12, which turns 5% monthly into 45.96%.
How does churn affect customer lifetime value?
Lifetime is 1 divided by churn, so small changes matter a lot. Cutting churn from 5% to 3% a month lengthens the average life from 20 to 33.3 months. At 35 of monthly profit per customer, lifetime value rises from 700 to about 1,167.