Churn
attrition
The rate at which customers leave. It sets the ceiling on growth, because every new customer first has to replace one that left before any of them counts as progress.
In practice
A hundred customers, five leaving monthly. You need five new customers a month before you have grown at all, and that number rises every time you get bigger.
The common mistake
Treating churn as a retention problem when it is usually a sales problem. Customers who never fit leave on schedule, and the decision that produced the churn was made before they bought.
Churn is the rate at which customers leave over a period. It is the number that decides whether your growth compounds or whether you are refilling a bucket with a hole in it.
How to calculate it
Customer churn is customers lost in a period divided by customers at the start of that period. Twenty customers at the start of the month, one gone by the end, and monthly churn is five percent.
Revenue churn measures money instead of logos, and the two can point in opposite directions. Losing five small accounts and keeping the large one looks terrible on customer churn and barely registers on revenue. Losing the large one looks fine on customer churn and takes the quarter with it. Track both, and know which one your business actually runs on.
Net revenue churn subtracts expansion from existing customers. When accounts grow faster than others leave, net churn is negative, and revenue increases without a single new customer. That is the strongest position a subscription business can hold.
Why it compounds
Five percent monthly churn means the average customer stays twenty months. Three percent means thirty-three months. That difference multiplies through everything downstream: what you can afford to pay for a customer, how long before they are profitable, and what the business is worth when someone values it on recurring revenue.
It also caps growth. At five percent monthly churn on a hundred customers, you lose five a month, so five new customers a month is a treadmill. The larger you get, the more you lose in absolute terms, which is why high-churn businesses plateau and cannot explain why.
Reading it honestly
Churn usually reports a decision made much earlier — who you sold to, what you promised, what the first thirty days looked like. Customers who were a poor fit leave on schedule, and no amount of attention in month eleven changes that.
Cancellations also lag. Someone stops using the product months before they stop paying, so a clean retention number can be hiding an empty account that has simply not been reviewed yet.
Concept web
Open the full webQuestions
What is a good churn rate?
It depends on who you sell to. Businesses selling to other companies on annual contracts often see under one percent monthly; consumer subscriptions frequently run five percent or higher. Compare against your own trend rather than a benchmark.
What is the difference between customer churn and revenue churn?
Customer churn counts accounts lost. Revenue churn counts money lost. They diverge when accounts differ in size, and revenue churn is the more important number when a few customers carry most of the revenue.
What is negative churn?
When existing customers expand their spending faster than other customers leave. Revenue from the existing base grows without any new customers, which is the strongest position a subscription business can hold.