Churn is the loss of customers or recurring revenue over a period, usually a month. Customer churn rate = customers lost during the period ÷ customers at the start × 100. Revenue churn uses lost MRR instead. Churn can be voluntary (a customer cancels) or involuntary (a payment fails). Net revenue churn subtracts upgrades, so it can go negative, which is the goal.
Key takeaways
- Churn rate = customers (or MRR) lost ÷ customers (or MRR) at the start of the period.
- Customer churn counts heads. Revenue churn counts dollars. Watch both.
- About a third of subscription churn is involuntary: failed payments, not unhappy customers.
- Annual churn isn't monthly churn × 12. Use 1 − (1 − monthly rate)^12.
Every month, a box of my favorite peppermint tea arrives from Amazon. I'm on Subscribe and Save, so I pay 10% less than a one-off buyer.
If I ever cancel, I become one unit of churn in Amazon's numbers. Multiply that by everyone who cancels that month, divide by everyone who was subscribed at the start, and you have a churn rate.
"Churn is one of the biggest killers of subscription businesses," I wrote in Chapter Nine of The Subscription Playbook. "No matter how well you do at sales and marketing, your business will fail if you can't keep your subscribers."
What does churn mean?
Churn is the loss of customers, or recurring revenue, over a period. It's the opposite of retention.
The word is short for "churn rate," and it's usually measured monthly. There are four ways to slice it:
| Type | The question it answers |
|---|---|
| Customer (logo) churn | How many customers left? |
| Revenue (MRR) churn | How much recurring revenue left, including downgrades? |
| Voluntary churn | How many chose to cancel? |
| Involuntary churn | How many were lost to failed payments? |
The churn formula
Customer churn rate = Customers lost during the period ÷ Customers at the start of the period × 100 Revenue churn rate = (MRR lost to cancellations + downgrades) ÷ MRR at the start of the period × 100
A gym with 400 members (illustrative)
The gym starts June with 400 members at $60 a month: $24,000 of MRR.
During June, 12 members cancel. 12 ÷ 400 = 3% customer churn.
Those 12 were paying $720 between them, so revenue churn is also 3%. But if eight more members downgrade to a $40 plan, that's another $160 lost: ($720 + $160) ÷ $24,000 = 3.7% revenue churn.
Don't count members who joined during June in the starting number. And to turn monthly churn into annual, use 1 − (1 − monthly rate)^12. At 3% a month, that's about 31% a year, not 36%.
Churn Rate CalculatorCustomer and revenue churn, plus what it costs you.Open the free tool →What is a good churn rate?
It depends on who you sell to and at what price. Recurly's July 2026 network data puts median churn at 3.22% for SaaS, 3.44% for business services, 4.25% for e-commerce and 4.99% for education. Involuntary churn sits around 1.25% across industries, which is roughly a third of the total.
And low churn isn't permanent. Peloton's monthly churn was 0.73% when I wrote the book. By the quarter to June 2026, it averaged 2.2%. For more context, see churn benchmarks by industry.
What people confuse churn with
Churn vs net revenue churn. Net revenue churn subtracts expansion from upgrades. If upgrades beat losses, it goes negative. In the book I called that "net negative churn," and it's what great subscription businesses aim for. See net negative churn.
Churn vs a bad month. A single month can mislead. Annual plans can only churn at renewal, so report them separately from monthly plans.
All churn is unhappy customers. It isn't. Failed cards are fixable with reminders and retries. See involuntary churn.
Work out what churn is costing you
Calculate customer and revenue churn, and the dollars behind them, with the free Churn Rate Calculator.
How to reduce churn
In the book, SaaS startup Groove had a 4.5% churn rate. It studied the behavior of customers who left, spotted "red flag" metrics such as short sessions, emailed those customers offering help, and cut churn by 71%. The lesson still holds: find out why people leave, then act before they do.
What to do next
Calculate last month's customer churn and revenue churn, split by voluntary and involuntary. Then work through the Churn Risk Checklist to find your biggest leak.
For the formulas done properly, read churn rate: formula and examples. For the fixes, read how to reduce churn.
Back to the subscription and pricing glossary.
Frequently asked questions
What is the difference between churn and attrition?
In subscription businesses they mean almost the same thing: customers leaving. 'Churn' is the usual term in software and subscriptions and is normally expressed as a rate per period. 'Attrition' is more common in gyms, banking and HR, where it's also used for staff leaving. Whichever word you use, define the period and what counts as a loss.
Is a downgrade counted as churn?
Not in customer churn, because the customer is still there. It is counted in revenue churn, usually as contraction MRR: revenue lost from customers who stay but pay less. Track downgrades separately as well, because a rising downgrade rate is often an early warning that cancellations are coming.
What is first-month churn?
First-month churn is the share of new customers who cancel within their first month. It's best tracked separately from your main churn rate, because it usually points to an onboarding or expectations problem rather than a product one. If it's high, look at how quickly new customers reach their first real win.
Can you stop customers leaving by making cancellation hard?
You shouldn't, and in many places you can't. Hard-to-cancel flows damage trust and attract regulators: Amazon paid $2.5 billion over Prime cancellation practices. In Australia, new rules from 1 July 2027 require an easy, straightforward way to cancel. Save customers with value, such as a pause or a cheaper plan, not friction.
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Robert Coorey, MBA
Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.
Sources
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.