Churn Rate
Percentage of customers who stop using a product in a given period.
Formula
Variables
Example
50 lost out of 1 000 → Churn = 5 %
How it works
Churn rate tells you what fraction of your starting customer base left during a chosen period, then converts that fraction into a percentage. It works by comparing the number lost to the number you had at the beginning, so the result is easy to interpret across different business sizes. A higher churn rate means you are replacing more customers just to stay level, which can hurt revenue and growth.
When to use it
Use this when tracking subscriptions, memberships, app users, or any business where customers can leave over time. It is especially useful for monthly or annual retention analysis and for comparing customer loss across periods or segments.
Worked example, step by step
Starting customers = 2,500 Customers lost during the month = 125 Churn = (Customers Lost ÷ Customers at Start) × 100 Churn = (125 ÷ 2,500) × 100 Churn = 0.05 × 100 Churn = 5% So, the churn rate for the month is 5%.
Common mistakes to avoid
- Using customers at the end of the period instead of customers at the start
- Counting new sign-ups as if they reduce churn
- Forgetting to multiply by 100 when converting to a percentage
Did You Know?
Reducing churn by just 5 % can increase profitability by 25–95 %, according to Harvard Business School research.
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