For any business with recurring revenue, churn is one of the most consequential metrics. Small differences compound dramatically - cutting monthly churn from 5% to 3% increases customer lifetime by 65%.
Definition
Churn Rate - the percentage of customers (or revenue) lost during a period. Customer churn measures count of customers lost; revenue churn measures MRR lost.
Formula
Monthly Customer Churn = Customers Lost ÷ Customers at Start × 100% Monthly Revenue Churn = Churned MRR ÷ Starting MRR × 100%
Common uses
- LTV calculation - average customer lifetime = 1 ÷ monthly churn
- Cohort analysis - tracking churn by acquisition cohort surfaces patterns
- Investor reporting - one of the headline SaaS metrics
Watch out
Net churn can be more important than gross churn. A business with 5% gross monthly churn but 8% expansion revenue from remaining customers has negative net churn - one of the strongest signals in business.