Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A blended monthly churn rate across an entire customer base can hide sharply different retention behavior between customer segments, because a business's overall churn figure is a weighted average, and a strong cohort's retention can mask a weaker cohort's problem that a full cohort-based analysis would reveal clearly.
Before you rely on it
What to check
Break churn down by cohort or customer segment periodically, not just the single blended company-wide rate, since the blended figure can hide a specific segment's real problem.
The common error
Where people go wrong with saas churn calculator
Relying on a single blended churn figure to judge overall retention health. A stable-looking blended rate can be masking a genuinely deteriorating segment offset by a strong one, information only a cohort-level view actually reveals.
Sensitivity evidence
How customers at period start changes the monthly customer churn
| Customers at period start | Monthly customer churn | Simple implied customer lifetime |
|---|---|---|
| 800 | 3.1% | 32.0 months |
| 900 | 2.8% | 36.0 months |
| 1,000worked example | 2.5% | 40.0 months |
| 1,100 | 2.3% | 44.0 months |
| 1,200 | 2.1% | 48.0 months |
Every input, tested
Which input moves the monthly customer churn most
| Input | Tested from | To | Monthly customer churn at each end | Swing |
|---|---|---|---|---|
| Customers at period start | 900 | 1,100 | 2.8% to 2.3% | 0.505% (20%) |
| Customers lost during month | 23 | 28 | 2.3% to 2.8% | 0.500% (20%) |
Two variables at once
Monthly customer churn by customers at period start and customers lost during month
| Customers at period start \ Customers lost during month | 20 | 25 | 30 |
|---|---|---|---|
| 800 | 2.5% | 3.1% | 3.8% |
| 900 | 2.2% | 2.8% | 3.3% |
| 1,000 | 2.0% | 2.5% | 3.0% |
| 1,100 | 1.8% | 2.3% | 2.7% |
| 1,200 | 1.7% | 2.1% | 2.5% |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Customers at period start | 1,000 |
| Customers lost during month | 25 |
| Monthly customer churn | 2.5% |
| Simple implied customer lifetime | 40.0 months |
Where the inputs come from
Customers at period start is the number of active paying customers on the first day of the month, and customers lost during month is those who canceled or did not renew, not counting new customers who joined during the month. Use logo churn for customers and a separate revenue churn for dollars. For annual contracts, measure at renewal dates. Define churn consistently, including whether failed payments that recover are counted.
When the result stops applying
Small-customer plans churn more than enterprise contracts. A blended number hides which segment is leaking. Customer churn differs from revenue churn when larger customers leave or shrink.
What to compare it with
Connect churn to value on the LTV:CAC calculator, and revenue-based views on the net and gross revenue retention pages. The MRR and MRR growth calculators show the effect on revenue. The CAC payback page shows whether acquisition cost is recovered before churn.
People also ask
Frequently asked questions
What is a good monthly churn rate?
For SMB software 3% to 5% monthly is common, and enterprise software often runs under 1% monthly. Lower is better, and it should improve as the product matures.
How do I convert monthly churn to annual?
One minus the quantity one minus the monthly rate, raised to the 12th power. A 2% monthly churn is about 21.5% a year.
What causes customer churn?
Poor onboarding, lack of value, price, competition, business closures and failed payments. Exit surveys and usage data show which matter for you.