Customer Churn Rate

What is Customer Churn Rate?

Customer Churn Rate is the percentage of customers a subscription-based company loses over a given period due to cancellations or non-renewals.

Customer Churn Rate is a critical KPI for subscription-based businesses for two reasons: retaining a current customer costs far less than acquiring a new one, and in recurring revenue models, a single customer can represent hundreds or thousands of dollars in future revenue.

Customer Churn Rate formula

To calculate Customer Churn Rate, use the following formula:

Customer Churn Rate = (Number of customers lost during a period / Total number of customers at the beginning of the period) × 100

This formula expresses churn as a percentage, showing the proportion of customers who stopped doing business with you during a specific time frame.

How to calculate Customer Churn Rate

1. Choose a time period: Select a specific period, such as a month, quarter, or year.
2. Count total customers at the start: Determine how many customers you had at the beginning of that period.
3. Count customers lost: Identify how many customers cancelled or did not renew during the period.
4. Apply the formula: Use the Customer Churn Rate formula to get your percentage.
5. Interpret the result: A lower churn rate indicates stronger customer retention. A higher rate signals a need for intervention.

Gross vs. net Customer Churn Rate

Companies concerned with customer attrition often distinguish between gross and net Customer Churn Rate.

Gross Customer Churn Rate measures the rate at which a company is losing customers. Net Customer Churn Rate measures the difference between Gross Customer Churn Rate and New Customer Acquisition Rate.

For example, if a company's Gross Customer Churn Rate is 7% and its New Customer Acquisition Rate is 5%, the Net Customer Churn Rate is 2%.

A positive Net Customer Churn Rate signals that customer growth is contracting — a warning sign for any subscription-based business. Because of this, many subscription companies maintain dedicated teams focused on re-engaging at-risk customers or winning back those who have already left.

^{1 Zero Defections: Quality comes to service, Reichheld & Sasser. Harvard Business Review. 1990.}

Monitoring Customer Churn Rate on a dashboard

Once you've established benchmarks and targets for Customer Churn Rate, you'll want a reliable process for tracking it alongside other SaaS KPIs. Dashboards bring all your metrics into one place, making it easy to spot trends and act before churn accelerates.

Learn more about how to track your Customer Churn Rate on a SaaS Dashboard.