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MasterMath

Churn Rate Calculator

A churn of 5 % a month sounds small, but it means a customer lasts twenty months and that a year later you have barely half your base left. Work out your churn and what it implies.

Currency and number format for

Monthly churn

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Monthly churn—
Retention—
Average customer lifetime—
Of your base, in a year—
Revenue walking out—
Balance for the month—

How this was worked out

    The formula

    churn = cancellations in the period ÷ customers at the start

    What it means

    Churn measures what proportion of customers leave in a period. Its importance is not in the number but in its inverse: at 5 % a month, the average customer lifetime is twenty months, and that is what sets how much you can afford to spend winning one.

    How to work it out by hand

    1. Count the customers you had at the start of the period
    2. Count the cancellations in that same period
    3. Divide the cancellations by the starting customers
    4. Invert the result to see how long a customer lasts on average

    What is worth knowing

    The figure that stings is the twelve-month projection: at 5 % a month, 1,000 customers become 540 within the year, and you have to win 460 simply not to shrink. That is why cutting churn by a point is usually worth more than raising acquisition by 20 %. Two warnings on measuring it: work it out on the ending customers rather than the starting ones and it comes out lower than it is; and if the business is growing fast, churn is diluted because the denominator includes customers too new to have left yet.

    Frequently asked questions

    What churn is acceptable?

    In enterprise SaaS, under 1 % a month is considered good. In consumer products, 3 % to 5 % is usual, and above 10 % the business does not hold up.

    How does it relate to LTV?

    Directly: average lifetime is the inverse of churn, and LTV is that lifetime times the monthly revenue. Halve the churn and you double the LTV.

    Is it measured on customers or on revenue?

    Both, and they do not agree. If the smallest payers leave, revenue churn is lower than customer churn; if the big ones leave, the other way round.

    Why does my churn look low when I am growing fast?

    Because the new customers have not had the chance to leave yet and swell the denominator. With fast growth it is worth measuring by cohort.