How to Calculate Churn Rate (With Examples)

To calculate churn rate, divide the number of customers you lost during a period by the number of customers you had at the start of that period: churn rate = customers lost ÷ customers at start × 100. Customers lost equals customers at the start plus new customers minus customers at the end. For example, if you start a month with 500 customers, add 60 and end with 530, you lost 30, so monthly churn is 30 ÷ 500 = 6%.

That is the core formula. The rest of this guide covers the variants you will need in practice: retention rate, revenue churn, converting between monthly and annual figures, churn for businesses without subscriptions, and the mistakes that make churn numbers misleading. The churn rate calculator does all of these calculations for you.

The customer churn formula

Churn rate = (customers at start + new customers − customers at end) ÷ customers at start

The three inputs:

Input	Example
Customers at the start of the period	500
New customers won during the period	60
Customers at the end of the period	530

Customers lost = 500 + 60 − 530 = 30 Churn rate = 30 ÷ 500 = 6% per month

If your system tracks cancellations directly, you can use that count instead of deriving it. Just make sure cancellations by customers who joined during the same period are handled consistently (see the mistakes section).

Retention rate: the other side of the same number

Retention rate = (customers at end − new customers) ÷ customers at start

Using the same example: (530 − 60) ÷ 500 = 470 ÷ 500 = 94%.

For a single period, retention rate = 1 − churn rate. People use whichever framing is more natural: retention for "how good are we at keeping customers", churn for "how fast are we losing them".

Revenue churn

Customer churn treats every customer the same. Revenue churn weights them by what they pay, which matters when customers differ a lot in size.

Gross revenue churn = (recurring revenue lost from cancellations + downgrades) ÷ recurring revenue at start

Net revenue churn = (revenue lost from cancellations + downgrades − expansion revenue from existing customers) ÷ recurring revenue at start

Worked example

A business starts the month with $50,000 in monthly recurring revenue (MRR).

• Cancellations: $2,000 of MRR
• Downgrades: $500 of MRR
• Upgrades by existing customers: $1,500 of MRR

Gross revenue churn = (2,000 + 500) ÷ 50,000 = 5% Net revenue churn = (2,000 + 500 − 1,500) ÷ 50,000 = 2%

If upgrades exceed losses, net revenue churn becomes negative: existing customers as a group are growing their spending, even without any new customers. Revenue from new customers is never included in either figure.

Converting between monthly and annual churn

A common error is multiplying monthly churn by 12. That overstates annual churn, because each month's losses come from a smaller remaining base.

Annual churn = 1 − (1 − monthly churn)^12 Monthly churn = 1 − (1 − annual churn)^(1/12)

Monthly churn	Annual churn (correct)	Monthly × 12 (wrong)
1%	11.4%	12%
2%	21.5%	24%
3%	30.6%	36%
5%	46.0%	60%
8%	63.2%	96%

The same logic applies to quarters: annual churn = 1 − (1 − quarterly churn)^4.

These conversions assume churn stays roughly constant over the year, which is a simplification. In reality, churn is often higher for new customers and lower for long-standing ones, which is why cohort retention analysis is worth doing alongside the headline figure.

Average customer lifetime from churn

With a constant churn rate, the average customer stays 1 ÷ churn rate periods.

• 6% monthly churn → 1 ÷ 0.06 ≈ 16.7 months
• 25% annual churn → 1 ÷ 0.25 = 4 years

That figure feeds straight into how to calculate customer lifetime value.

Churn for businesses without subscriptions

Shops, restaurants and service firms do not have cancellations. A customer simply stops coming. To calculate churn, you need a rule for when a customer counts as lost.

Step 1: Define "active". For example: "bought at least once in the last 6 months". Choose a window of roughly two to three times your customers' typical purchase interval.

Step 2: Count active customers at the start and end of each period, and new customers (first purchase during the period).

Step 3: Apply the formula.

Worked example: an online shop

The shop defines active as "ordered in the last 180 days".

	Count
Active customers on January 1	2,400
First-time customers in Q1	380
Active customers on March 31	2,450

Customers lost = 2,400 + 380 − 2,450 = 330 Quarterly churn = 330 ÷ 2,400 = 13.75% Annual equivalent = 1 − (1 − 0.1375)^4 ≈ 44.7%

Be careful when interpreting this: with a 180-day window, a customer who stopped buying in October only "churns" in April. The lapse window delays the signal. Shorter windows react faster but misclassify slow buyers as lost.

Common mistakes

1. Putting new customers in the denominator

Some people calculate churn as lost ÷ (start + new). That makes churn look lower when you are growing quickly. Stick to customers at start.

2. Counting churn of brand-new customers inconsistently

Customers who join and leave within the same period are a judgement call. They are not in "customers at start", but they are lost. Common approaches: exclude them from the period's churn and track them separately as early churn, or report them in the next period. Choose one approach and document it.

3. Mixing definitions over time

If you change the lapse window or the definition of "customer", earlier and later churn figures are not comparable. Note the definition next to every report.

4. Averaging churn rates of different-sized groups

The average of 2% churn in a segment of 1,000 customers and 10% churn in a segment of 50 is not 6%. Combine the raw counts instead: (20 + 5) ÷ 1,050 ≈ 2.4%.

5. Looking only at the total

One company-wide churn number can hide a problem in one product, region or customer type. Break churn down by segment at least once a quarter.

6. Ignoring involuntary churn

For subscriptions, some churn comes from failed payments, not decisions. Track it separately; it is usually easier to fix, for example with payment reminders.

What to do with your churn rate

A churn number is a starting point. To reduce it:

1. Ask customers who leave for one reason, and group the answers.
2. Look for customer churn warning signs in the weeks before customers leave.
3. Check whether churn is concentrated early in the relationship, which points to onboarding.
4. Calculate what lower churn would be worth with the customer lifetime value calculator.

Then try one improvement at a time from our list of customer retention strategies, and measure churn again with the same definition.

Your next step

Write down your definition of a lost customer in one sentence. Then pull three numbers for last month (or last quarter): customers at the start, new customers and customers at the end. Enter them in the churn rate calculator to get churn, retention, the annual equivalent and the implied average customer lifetime.