How it works
Churn rate is the share of customers you had at the start of a period who left by the end. Retention rate is the opposite: the share who stayed.
New customers added during the period are excluded from the churn calculation, so strong sign-ups cannot hide high attrition. Customers lost = start + new − end.
Monthly churn compounds. 5% a month sounds small but means losing about 46% of a customer base over a year, which is why the annualized figure is shown.
Formula
Churn = (Start + New − End) ÷ Start. Retention = 1 − Churn. Annual churn = 1 − (1 − periodic churn)^periods per year.
Questions people ask
What is a good monthly churn rate?
For subscription businesses selling to consumers, 3–7% a month is common. Business software aimed at larger companies often targets under 1% monthly (under about 10% a year).
Why not just multiply monthly churn by 12?
Because each month churn applies to a smaller remaining base. 3% monthly churn is about 30.6% a year, not 36%.
What is the difference between customer churn and revenue churn?
Customer churn counts accounts lost. Revenue churn measures recurring revenue lost, including downgrades, and can be offset by expansion revenue to give net revenue retention.