How to calculate churn rate: customer and revenue churn formulas

To calculate churn rate, divide the number of customers who cancelled during a period by the number of customers you had at the start of that period, then multiply by 100. For example, if you started the month with 400 customers and 12 cancelled, your monthly customer churn rate is 12 ÷ 400 × 100 = 3%.

That is the simplest version. Most subscription businesses also track revenue churn, because losing a large customer hurts more than losing a small one. This guide covers both, plus the details that make the numbers trustworthy.

How to calculate churn rate for customers

Customer churn rate = customers lost during the period ÷ customers at the start of the period × 100

Rules that keep this consistent:

• Count only customers who were active at the start. Customers who sign up and cancel within the same month are excluded from both the numerator and the denominator, or tracked separately as early churn.
• Define "lost". Usually a subscription that was cancelled or ended during the period. Decide how you treat past-due accounts, for example counting them as churned once they are cancelled for non-payment.
• Use the same period every time. Monthly for most subscription businesses; quarterly or annual for contract-based ones.

Worked example: customer churn

Monthly customer churn = 12 ÷ 400 × 100 = 3.0%

Note that the 35 new customers do not reduce your churn rate. New sales and churn are separate numbers, and it is worth reporting them separately.

Revenue churn: weighting by value

Customer churn treats a R200 per month customer and a R20,000 per month customer the same. Revenue churn fixes that by using monthly recurring revenue (MRR), excluding VAT.

Gross revenue churn rate = (churned MRR + contraction MRR) ÷ MRR at the start of the period × 100

• Churned MRR: MRR from customers who cancelled.
• Contraction MRR: MRR lost from downgrades and removed seats among customers who stayed.

Worked example: revenue churn

Gross revenue churn = (R7,200.00 + R1,800.00) ÷ R180,000.00 × 100 = 5.0%

That is higher than the 3% customer churn, which tells you the customers who left were larger than average. That is a useful signal on its own.

Net revenue retention and net revenue churn

Expansion from existing customers can offset what you lose.

Net revenue retention (NRR) = (starting MRR − churned MRR − contraction MRR + expansion MRR) ÷ starting MRR × 100

Using the example above:

(R180,000.00 − R7,200.00 − R1,800.00 + R5,400.00) ÷ R180,000.00 × 100 = R176,400.00 ÷ R180,000.00 × 100 = 98.0%

Net revenue churn = 100% − NRR = 2.0%

An NRR above 100% means your existing customers are growing faster than you are losing revenue from them. New MRR is left out of NRR on purpose, because it measures the health of the customers you already have. For how these components fit into MRR reporting, see MRR vs ARR.

Converting between monthly and annual churn

Monthly and annual churn are not related by simple multiplication, because churn compounds.

Annual churn = 1 − (1 − monthly churn)^12

With 3% monthly churn: 1 − 0.97^12 = 1 − 0.694 ≈ 30.6% a year, not 36%.

Going the other way, monthly churn = 1 − (1 − annual churn)^(1/12).

Split churn by type and segment

A single churn rate hides what is going on. Break it down:

• Voluntary vs involuntary. Customers who chose to leave versus those lost to failed payments. Involuntary churn is often easier to fix; see how to reduce involuntary churn.
• By plan. Is churn concentrated on your entry plan?
• By tenure. Churn in the first 90 days usually points to onboarding problems; churn after a year points to value or competition.
• By payment method. Compare card, debit order and invoice customers.
• By acquisition channel. Some channels bring customers who stay; others do not.

Cohort analysis: the most reliable view

A cohort is a group of customers who started in the same month. Track what share of each cohort is still active after 1, 3, 6 and 12 months.

Illustrative figures. Cohorts show whether changes you made (a new onboarding flow, a new plan) actually improved retention for the customers who experienced them, which a blended monthly churn rate cannot.

Common pitfalls

1. Using the end-of-period customer count as the denominator. It flatters the rate when you are growing.
2. Counting paused subscriptions as churned. Decide how to treat pauses and document it.
3. Including trials. Trial users who never paid are a conversion issue, not churn.
4. Including VAT in revenue churn. Use amounts excluding VAT.
5. Comparing your rate to benchmarks without context. Churn varies hugely by customer size, price point and industry. Your own trend over time matters more than someone else's average.
6. Small numbers. With 50 customers, one cancellation moves churn by two percentage points. Look at rolling three-month averages.

A monthly churn report template

• Starting customers and MRR
• New customers and new MRR
• Churned customers and churned MRR, split voluntary and involuntary
• Expansion and contraction MRR
• Customer churn rate, gross revenue churn rate, NRR
• Top cancellation reasons
• Cohort retention table

How CentraPoint helps

CentraPoint keeps subscriptions, invoices, payments and cancellations in one place, with standard reports and a report builder for custom views. You can save reports, schedule them for email delivery and export to CSV or XLSX for your own churn and cohort analysis. Dunning retries and past-due handling help you separate and reduce churn caused by failed payments. See the features page for the full list.

Frequently asked questions

What is the formula for churn rate?

Customer churn rate is the number of customers lost during a period divided by the number of customers at the start of the period, multiplied by 100. For example, 12 lost out of 400 is 3%.

What is the difference between customer churn and revenue churn?

Customer churn counts how many customers left. Revenue churn measures how much recurring revenue was lost through cancellations and downgrades, so large customers carry more weight.

How do I convert monthly churn to annual churn?

Use annual churn = 1 − (1 − monthly churn)^12. A 3% monthly churn rate works out to about 30.6% a year, not 36%, because churn compounds.

What is net revenue retention?

Net revenue retention is the share of starting MRR you still have after churn, contraction and expansion from existing customers. Above 100% means expansion outweighs losses.