Definition
Churn rate measures the fraction of customers (logo churn) or recurring revenue (revenue churn) lost over a period. It is one of the most important drivers of LTV and payback.
Formula
Churn rate = losses / starting base (customers or revenue)
Example
If you start the month with 1,000 customers and lose 35, logo churn = 35 / 1,000 = 3.5% for the month.
How to use it
- Specify whether churn is logo churn (count) or revenue churn (dollars).
- Keep time units consistent (monthly vs annual) when using churn in formulas.
- Use cohort curves to see how churn changes over time rather than relying on a single average.
Common mistakes
- Mixing logo churn with revenue retention metrics (NRR/GRR).
- Using annual churn as if it were monthly churn (time unit mismatch).
- Relying on blended churn when segments behave differently.
Why this matters
This term matters because small changes compound in SaaS metrics. Use consistent definitions by cohort and segment so you can diagnose retention, payback, and growth quality.
Practical checklist
- Write a 1-line definition for "Churn Rate" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., Churn Rate Calculator) to sanity-check assumptions.
- Read the related guide (e.g., Retention curves: how to read them and why they matter) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- Churn Rate Calculator: Calculate customer churn rate for a period and compare retention across segments or cohorts.
- Retention Rate Calculator: Calculate retention rate for a period accounting for new customers.
- LTV Calculator: Estimate customer Lifetime Value (LTV) using ARPA, gross margin, and churn rate.
- LTV Sensitivity Calculator: See how gross profit LTV changes as churn and gross margin vary (simple 3x3 sensitivity).
- Unit Economics Calculator: Model CAC, payback, LTV, and LTV:CAC together from ARPA, gross margin, and churn.
Guides
- Retention curves: how to read them and why they matter: A practical guide to retention curves: what they show, how to interpret churn vs retention, and how to connect retention to LTV and payback.
- Cohort LTV forecasting: churn, expansion, discounting (practical model): A practical guide to cohort-based LTV: why it beats simple churn formulas, how to choose assumptions, and how to interpret discounted LTV.
- LTV sensitivity: how churn and margin change LTV: A practical guide to LTV sensitivity: vary churn and gross margin to see how gross profit LTV changes under realistic scenarios.
- Churn: How to measure churn rate correctly: A guide to churn rate: customer churn vs revenue churn, measurement choices, and how to track churn by cohort.
- LTV:CAC ratio: how to interpret the ratio (and avoid mistakes): Learn what LTV:CAC tells you, rough benchmarks, and how churn and payback change what 'good' looks like.