Nearly 70% of customers stop doing business with a brand after just one poor experience.
That’s why tracking churn rate isn’t optional; it’s essential for any company offering subscriptions or recurring services.
To calculate the churn rate, divide the number of customers lost by the number of customers at the start of the period, then multiply the result by 100. This simple formula reveals how quickly you’re losing customers and why it might be hurting your bottom line.
In this guide, you’ll learn exactly how to calculate churn rate, with examples, benchmarks, and tips to reduce churn rate. Let’s begin!
What is Churn Rate?
Churn rate is the percentage of customers who stop using your product or service during a certain time. It shows you how well you’re keeping people engaged and satisfied.
When churn goes up, your revenue goes down. A study by the National Bureau of Economic Research found that companies with higher churn rates experienced over 10% more revenue loss than those with low churn.
The churn rate for streaming is often driven by limited content, high pricing, or poor playback quality.
The good thing is you can control churn. By making onboarding simple, giving customers a clear view of their projects, and keeping communication steady, you’ll hold on to more of them. Tools like Agency Handy make those steps easier.
How to Calculate Churn Rate
There are different ways to measure churn depending on whether you are looking at customers, revenue, or specific time periods. Let’s go through the main formulas you need to know:
1. Basic Customer Churn Rate Formula
The basic customer churn rate indicates the number of customers lost compared to the number you had at the start. It is the simplest way to get a sense of how well you are keeping your customers.
Here is the formula you will use:
Customer Churn Rate (%) = (Customers Lost During Period ÷ Customers at Start of Period) × 100
For example, if you had 500 customers at the start of the month and 25 left by the end, you would calculate it like this:
(25 ÷ 500) × 100 = 5 percent churn rate.
Regularly tracking customer churn helps you identify problems early. If the number starts creeping up, you know it is time to dig deeper and find out why people are leaving.
2. Gross Revenue Churn Rate Formula
Sometimes it is not just about the number of customers you lose. It is about how much money they take with them when they leave. That is where gross revenue churn comes in.
Here is the formula to calculate it:
Gross Revenue Churn Rate (%) = (Revenue Lost During Period ÷ Revenue at Start of Period) × 100
Imagine you started the month with $100,000 in monthly revenue. If you lost $8,000 from customers canceling or downgrading, your gross revenue churn rate would be:
(8,000 ÷ 100,000) × 100 = 8 percent.
This number shows you exactly how much of your income is disappearing each period. It is an important signal for how churn affects your financial health.
3. Net Churn Rate Calculation
Net churn provides a clearer and more accurate picture of your business. It does not just look at what you lost. It also counts any new revenue you gained from upselling or expanding existing accounts.
Here is the formula you will use:
Net Churn Rate (%) = ((Revenue Lost – Expansion Revenue) ÷ Revenue at Start of Period) × 100
For example, say you lost $8,000 in canceled contracts, but you gained $3,000 from existing customers upgrading their plans. Your net churn would be:
(8,000 – 3,000) ÷ 100,000 × 100 = 5 percent.
If your net churn is low or even negative, that is a very good sign. It means your growth from existing customers is helping balance or even outpace the customers you lose.
4. Seasonal or Adjusted Churn Rate Calculation
If your business experiences ups and downs throughout the year, it is wise to examine your churn rate over a full twelve months, rather than just monthly snapshots. This gives you a more balanced view.
Here is how to calculate your annual churn rate:
Annual Churn Rate (%) = 1 – (1 – Monthly Churn Rate)¹²
For example, if your monthly churn rate is 3 percent, your annual churn is not just 36 percent. Instead, it compounds over the months. You would calculate:
1 – (1 – 0.03)¹², which is about 30.4 percent annual churn.
5. Monthly Churn Rate Formula
If you want a faster way to spot changes in customer behavior, tracking churn monthly is the way to go. Monthly churn allows you to react quickly, rather than waiting until the end of the year to discover a problem.
The formula is simple:
Monthly Churn Rate (%) = (Customers Lost This Month ÷ Customers at Start of Month) × 100
Let us say you had 500 customers at the beginning of the month and 10 canceled by the end. Your monthly churn rate would be:
(10 ÷ 500) × 100 = 2 percent.
6. Calculate Subscriber Churn Rate for Subscription Models
If you run a subscription business like SaaS, streaming services, or memberships, subscriber churn is one of the most important numbers you can track. It shows you how good you are at keeping your paying customers.
Here is the formula:
Subscriber Churn Rate (%) = (Cancelled Subscriptions ÷ Total Subscriptions at Start) × 100
For example, if you had 1,000 active subscribers at the start of the month and 50 canceled, your subscriber churn would be:
(50 ÷ 1,000) × 100 = 5 percent.
Churn Rate Examples Across Industries
Churn rate is not the same for every business. Different industries deal with different customer behaviors, contract lengths, and expectations.
Let us look at some real-world examples across different types of businesses:
SaaS Churn Rate Example
SaaS companies typically track churn monthly. For instance, if you start the month with 500 customers and 25 cancel, the churn rate is:
Customer Churn Rate = (25 ÷ 500) × 100 = 5%
A monthly churn rate of 3% to 5% is common in SaaS. A rate below that means you’re ahead of the curve. Higher churn? It could signal onboarding gaps, product fit issues, or poor support.
E-commerce Churn Rate Example
In e-commerce, churn looks a little different. Instead of subscriptions, you often measure repeat purchase rates.
For example, if 2,000 customers buy from you one month but only 1,200 come back to make another purchase within the next month, your churn rate would be:
(800 ÷ 2,000) × 100 = 40 percent.
E-commerce businesses naturally have higher churn than SaaS. A lot of customers buy once and never return, so focusing on loyalty programs and better retention strategies becomes crucial.
Logistics and Service Industry Churn Example
For businesses like logistics, agencies, or other service providers, churn often comes from contract cancellations or project endings.
Suppose you manage 150 active client contracts, and 9 clients do not renew at the end of the quarter. Your churn rate would be:
(9 ÷ 150) × 100 = 6 percent.
In service industries, relationships matter a lot. Losing a client often means losing a big chunk of revenue, so even a small churn percentage can make a big impact.
Customer Churn Rate by Industry
Here is a quick look at average churn rates across industries:
- SaaS: 3 to 7 percent monthly churn
- E-commerce: 20 to 40 percent annual churn
- Telecom: 1 to 3 percent monthly churn
- Subscription Boxes: 10 to 20 percent monthly churn
- Professional Services: 10 to 15 percent annual churn
How to Reduce Churn Rate Effectively
Reducing churn is about taking consistent, smart actions to keep your customers happy. Here are some proven ways you can start lowering your churn rate:
Make Onboarding Effortless
If your product feels hard to use from the start, people will leave quickly. Focus on guiding new users with simple steps that help them reach small wins early. A good first impression builds confidence and sets the tone for long-term use.
Spot Trouble Before It Happens
Watch for changes in user behavior—fewer logins, missed payments, or abandoned actions. These are early signs that someone might churn. Reach out before they disappear to offer help or ask what’s going wrong.
Recover Lost Payments Smoothly
Not all churn is intentional. Sometimes people leave because their payment fails and no one follows up. Use smart retries, email nudges, or auto card updates to stop preventable revenue loss.
Respond Smartly to Cancellation Attempts
When someone tries to cancel, don’t just say goodbye. Ask why and offer a solution that fits like a temporary pause or smaller plan. A simple conversation at this point can often save the relationship.
Keep Users Engaged After Onboarding
Once someone is onboard, continue delivering value. Highlight underused features, share tips, or send success stories. When customers see ongoing benefits, they’re more likely to stay for the long haul.
Learn From Every Cancellation
Use short exit surveys to understand why people leave. Over time, this data shows trends you can act on—like pricing issues or confusing features. Improving based on real feedback makes churn less likely.
Conclusion
Churn is a natural part of doing business, but that doesn’t mean you should ignore it. By learning how to calculate churn rate and tracking it regularly, you can catch early warning signs and make smarter decisions.
Focus on listening to your customers, spotting patterns, and improving the experience step by step. Even small changes can have a big impact.
If you’re running a service-based business, Agency Handy can make this easier. With features for onboarding, client communication, and project tracking all in one place, it helps you build stronger relationships that naturally reduce churn.
FAQs
Can churn rate be different for new customers compared to long-term customers?
Yes, new customers usually churn faster because they have not built loyalty yet. Long-term customers stay longer as they trust your brand. Tracking both groups separately gives you better insights.
What is a good churn rate?
A good churn rate depends on your industry. For SaaS, under 5 percent monthly is considered strong. In other industries, lower annual churn (below 20 percent) is usually a good sign.
How can improving onboarding reduce churn rate?
A strong onboarding process helps customers see value quickly. If users feel confident and supported early, they are much less likely to leave. Good onboarding builds trust from the start.
