Calculate customer churn and retention rates for a period, and see what a monthly churn rate means over a full year.
What is churn?
Churn rate is the share of customers who stop doing business with you during a period, for example cancelling a subscription. Retention rate is the opposite: the share who stay.
Churn rate = customers lost ÷ customers at start × 100
Retention rate = 100% − churn rate
Worked example
You start the month with 1,500 customers and 45 cancel. Monthly churn is 45 ÷ 1,500 = 3%, and retention is 97%.
3% a month sounds small, but over a year it compounds to about 30.6%: of 1,500 customers, only about 1,040 would remain without new sign-ups. The average customer would stay about 33 months.
Why churn matters
- Winning new customers usually costs much more than keeping existing ones.
- Lower churn directly raises customer lifetime value.
- High churn can hide behind strong sign-up numbers until growth stalls.
How to reduce churn
- Make the first weeks easy with clear onboarding.
- Ask customers why they leave, and fix the most common reasons.
- Watch for warning signs such as dropping usage, and reach out early.
- Offer annual plans or pause options instead of outright cancellation.
Frequently asked questions
Should new customers during the period be counted?
The simple formula uses customers at the start of the period only, so new sign-ups do not distort the rate.
What is a good churn rate?
It varies by industry and price point. Many subscription businesses aim for low single-digit monthly churn.
Related tools
Results are estimates for planning and education. They are not accounting, tax or legal advice. Check important figures with a qualified accountant.