Formula, in SaaS Metrics
Churn Rate Formula: How to Calculate Churn Rate
To calculate churn rate, count the customers you had at the start of a period, count how many of those customers cancelled or lapsed by the end of it, divide the second number by the first and multiply by 100. Customers who signed up during the period are left out of both counts, so a busy month of sign-ups cannot hide the customers you lost.
3 variables. Published Mar 12, 2026. Updated Oct 11, 2026. By AI Biz Hub.
Churn Rate = Customers Lost / Starting Customers x 100 Variables
CR
Churn Rate
The percentage of starting customers lost over the period. Always state the period: a monthly and an annual churn rate are different numbers for the same business.
CL
Customers Lost
Customers from the starting group who cancelled or lapsed during the period. Count logos, not revenue, for customer churn; revenue churn uses the separate MRR formula below.
SC
Starting Customers
Active paying customers on the first day of the period. Customers added mid-period are excluded from this denominator and from the customers lost.
Step by step
- 1
Pick the period and count active paying customers on its first day.
On 1 March there are 1,200 paying customers, so the starting customers figure is 1,200.
- 2
Count how many of those starting customers cancelled or failed to renew by the last day of the period.
48 of the 1,200 cancelled in March; the 90 customers who signed up in March are ignored.
- 3
Divide customers lost by starting customers and multiply by 100.
48 divided by 1,200 is 0.04, so the March churn rate is 4%.
- 4
Convert to an annual rate with compounding, not by multiplying by 12.
Annual churn is 1 minus 0.96 to the power of 12, which is 38.7%, not 48%.
- 5
Model what a lower churn rate is worth with the churn retention calculator.
Cutting monthly churn from 4% to 2.5% keeps 150.35 more of 1,200 customers after 12 months, worth $142,895.68 at $129 a month.
Worked example
What a lower churn rate is worth over 12 months
Active Customers
1,200
Monthly Churn Percent
4.00%
Retention Lift Percent
1.50%
Monthly ARPU
129
At 4% monthly churn, 1,200 customers shrink to 1,200 x 0.96^12 = 735.25 after 12 months with no new sign-ups. At an improved 2.5% churn they shrink to 1,200 x 0.975^12 = 885.6. The churn-retention calculator reports the gap and the revenue it represents at $129 per customer per month.
The calculator returns 150.35 customers kept at month 12 and an improved churn rate of 2.50%, worth $142,895.68 of cumulative revenue over the 12 months.
Common variations
Churn rate calculation examples
The same formula works for any period, as long as the starting customers and the customers lost cover the same window. Revenue churn follows the same pattern with monthly recurring revenue (MRR) in place of customer counts.
| Case | Inputs | Calculation | Churn rate |
|---|---|---|---|
| Monthly customer churn | 1,200 starting customers, 48 lost in the month | 48 / 1,200 x 100 | 4.0% monthly |
| Annual customer churn | 1,000 customers on 1 January, 180 of them gone by 31 December | 180 / 1,000 x 100 | 18.0% annual |
| Gross revenue churn | $50,000 starting MRR, $2,000 lost to cancellations, $500 to downgrades | ($2,000 + $500) / $50,000 x 100 | 5.0% monthly |
| Net revenue churn | Same as above plus $1,500 of expansion MRR | ($2,500 - $1,500) / $50,000 x 100 | 2.0% monthly |
Monthly churn to annual churn
Churn compounds because each month's losses come from a smaller remaining base. Multiplying a monthly rate by 12 overstates annual churn, and the gap widens as churn rises.
| Monthly churn | Annual churn, compounded | Monthly churn x 12 (wrong) |
|---|---|---|
| 1% | 11.4% | 12% |
| 2% | 21.5% | 24% |
| 3% | 30.6% | 36% |
| 4% | 38.7% | 48% |
| 5% | 46.0% | 60% |
| 10% | 71.8% | 120% |
Common churn rate mistakes
- Counting new customers in the denominator. Adding mid-period sign-ups to starting customers lowers the churn rate without any change in how many customers left.
- Multiplying monthly churn by 12. Use 1 - (1 - monthly churn)^12; the simple multiple overstates annual churn and passes 100% above about 8.3% monthly churn.
- Mixing customer churn and revenue churn. Losing many small accounts and a few large ones give very different revenue churn; report both and label which is which.
- Comparing periods of different length. A 30-day and a 31-day month, or a quarter and a month, are not comparable without converting to the same period.
- Ignoring involuntary churn. Failed payments that are never recovered are churn too; track them separately because card retries and dunning emails fix them.
Churn rate and customer lifetime
With a steady monthly churn rate, the average customer stays about 1 / monthly churn months: 4% monthly churn implies a 25-month average lifetime, 2% implies 50 months. That lifetime drives customer lifetime value, so small changes in churn move LTV a long way; the customer lifetime value calculator and the churn retention calculator turn these rates into dollars.
Run the numbers next
- Run the Numbers Customer Lifetime Value Calculator
Calculate CLV, CLV:CAC ratio, and acquisition payback from purchase patterns.
- Run the Numbers CAC Calculator
Calculate customer acquisition cost, payback period, and LTV:CAC efficiency.
Questions people ask next
How do you calculate churn rate?
Divide the number of customers lost during a period by the number of customers at the start of that period, then multiply by 100. If you start the month with 1,200 customers and 48 of them cancel, churn is 48 / 1,200 x 100 = 4% for that month. Leave out customers who joined during the month.
How do you convert monthly churn to annual churn?
Use annual churn = 1 - (1 - monthly churn)^12. A 4% monthly churn rate gives 1 - 0.96^12 = 38.7% a year, not 48%, because each month's losses come from a smaller remaining base.
What is the difference between customer churn and revenue churn?
Customer churn counts accounts lost; revenue churn measures the recurring revenue lost to cancellations and downgrades as a share of starting revenue. Net revenue churn also subtracts expansion revenue from upgrades, so it can be negative when existing customers grow more than others leave.
What is the formula for retention rate?
For the same period and the same starting group, retention rate = 100% - churn rate. If 4% of starting customers churn in a month, 96% are retained. Over several periods, multiply the period retention rates, which is why 96% monthly retention leaves 61.3% of customers after a year.
Sources
- How to Calculate Churn Rate , HubSpot
- Proven Strategies to Reduce Customer Churn (Chargebee) , Chargebee
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