How to use it
- Choose the length of the period.
- Enter customers at the start, customers lost and new customers.
- For revenue churn, enter recurring revenue at the start and the revenue lost to cancellations and downgrades and gained from upgrades. Leave the starting revenue at 0 to skip it.
How it works
- Customer churn = lost ÷ customers at start; retention = 1 − churn.
- Customers at the end = start − lost + new.
- Yearly equivalent = 1 − (1 − churn)^(12 ÷ months in the period).
- Gross revenue churn = (lost revenue + downgrades) ÷ starting revenue.
- Net revenue churn = (lost revenue + downgrades − upgrades) ÷ starting revenue; NRR = 1 − net revenue churn.
Worked example
A subscription business starts the month with 1,000 customers, loses 50 and gains 80. Churn is 50 ÷ 1,000 = 5%, retention 95%, and it ends with 1,030 customers. Over a year, 5% a month compounds to 1 − 0.95^12 ≈ 45.96%.
It started with 50,000 in monthly recurring revenue, lost 2,000 to cancellations and 500 to downgrades, and gained 1,500 from upgrades. Gross revenue churn = 2,500 ÷ 50,000 = 5%; net revenue churn = 1,000 ÷ 50,000 = 2%; NRR = 98%.
Tips
- Count only customers who were there at the start in “lost”; a customer who joins and leaves in the same month distorts the rate.
- Report the period with the number: 5% monthly and 5% yearly are very different.
- Revenue churn can differ a lot from customer churn when large and small customers behave differently.