Churn rate is the share of customers (or recurring revenue) you lose in a period. Customer churn rate = customers lost during the period ÷ customers at the start of the period × 100. Revenue churn uses MRR lost to cancellations and downgrades instead. Don't count customers who joined during the period, and convert monthly to annual churn with 1 − (1 − monthly rate)^12.
Key takeaways
- Customer churn = customers lost ÷ customers at the start of the period. New sign-ups never go in the calculation.
- Revenue churn often tells a different story from customer churn. Track both.
- Annual churn isn't monthly churn × 12. 3% a month is about 31% a year, not 36%.
- Net revenue churn can be negative. That's net negative churn, the goal of every subscription business.
Two subscription businesses each lose twenty customers this month.
One of them is in real trouble. The other is growing.
How can that be? Because the twenty customers aren't the whole story. It matters how many customers you started with, how much those leavers were paying, and how much more your remaining customers spent.
That's why there isn't one churn rate. There are three you should know, and they answer different questions.
What is churn rate?
Churn rate is the percentage of customers, or recurring revenue, that you lose over a period, usually a month.
- Customer churn (also called logo churn) asks: how many customers left?
- Revenue churn asks: how much recurring revenue left?
- Net revenue churn asks: after upgrades, did my existing customers pay me more or less than last month?
For the definition in one line, see the glossary entry for churn.
The churn rate formula
Customer churn rate
Customer churn rate = Customers lost during the period ÷ Customers at the start of the period × 100
Revenue (MRR) churn rate
Revenue churn rate = (MRR lost to cancellations + MRR lost to downgrades) ÷ MRR at the start of the period × 100
Net revenue churn rate
Net revenue churn = (Churned MRR + Contraction MRR − Expansion MRR) ÷ Starting MRR × 100
If the answer is negative, congratulations. You have net negative churn: your existing customers are paying you more than you're losing. That's the same as net revenue retention above 100%.
A worked example (from the book, done properly)
In Chapter Nine of The Subscription Playbook I used this example.
1,000 customers at $20 a month
You start the month with 1,000 customers each paying $20. Starting MRR is $20,000.
Customer churn. Twenty customers cancel. 20 ÷ 1,000 = 2% customer churn.
Revenue churn. Those twenty were paying $20 each, so you lose $400 of MRR. $400 ÷ $20,000 = 2% revenue churn.
Expansion. Thirty customers upgrade from $20 to a $50 tier. In the book I counted the full $50 as expansion, which gives $1,500. Strictly, only the extra $30 per customer is new revenue: 30 × $30 = $900 of expansion MRR.
Net revenue churn. ($400 − $900) ÷ $20,000 = −2.5%. Ending MRR is $20,000 − $400 + $900 = $20,500.
You lost 2% of customers and still grew revenue by 2.5%. That's net negative churn.
Now change one thing. Suppose the twenty who left were your biggest accounts, paying $200 each. Customer churn is still 2%. But revenue churn is $4,000 ÷ $20,000 = 20%. Same headcount, very different month.
That's the two businesses from the start of this page.
Churn Rate CalculatorCustomer and revenue churn, plus what it costs you.Open the free tool →Customer churn vs revenue churn: which one matters?
Both. They tell you different things.
| Customer (logo) churn | Revenue churn | |
|---|---|---|
| Measures | How many customers left | How much MRR left |
| Best for | Spotting product or onboarding problems | Seeing the financial impact |
| Hides | Whether the leavers were big or small | How many unhappy small customers you have |
| Can be negative? | No | Net revenue churn can |
| Watch most closely if | You sell one price to many customers | Your customers pay very different amounts |
If you sell to consumers at one price, customer churn is the number to obsess over. If you sell B2B with a wide spread of contract sizes, revenue churn matters more, because one large account leaving can wipe out a month of wins.
How do you convert monthly churn to annual churn?
This is the mistake I see most often. Annual churn is not monthly churn × 12, because each month you're losing a share of a smaller base.
Annual churn = 1 − (1 − monthly churn rate)^12
| Monthly churn | Customers kept after 12 months | Annual churn |
|---|---|---|
| 1% | 88.6% | 11.4% |
| 2% | 78.5% | 21.5% |
| 3% | 69.4% | 30.6% |
| 5% | 54.0% | 46.0% |
| 7% | 41.9% | 58.1% |
| 10% | 28.2% | 71.8% |
Look at the 5% row. Half your customers gone in a year. If you're there, retention is your most important project. Start with the twelve retention strategies.
What churn means for lifetime value
Churn is the engine inside customer lifetime value. The lower your churn, the longer the average customer stays.
Average customer lifetime (months) = 1 ÷ monthly churn rate LTV = ARPU × gross margin % ÷ monthly churn rate
At $50 a month, an 80% gross margin and 4% monthly churn, LTV is $50 × 0.8 ÷ 0.04 = $1,000. Cut churn to 2% and LTV doubles to $2,000, without changing your price. More on this in customer lifetime value.
LTV CalculatorCustomer lifetime value for subscription businesses.Open the free tool →Five mistakes that make churn numbers wrong
- Counting new customers. A customer who joins on the 10th and leaves on the 25th is a real loss, but adding them to the calculation (or the denominator) muddies the trend. Measure them separately as "first-month churn."
- Dividing by the end-of-month count. Always divide by customers (or MRR) at the start of the period.
- Mixing annual and monthly plans. Annual plans can only churn at renewal. Blend them in and your monthly rate looks artificially low. Report them separately.
- Ignoring failed payments. Customers whose cards failed and never recovered are churn too. Split voluntary from involuntary churn so you know which fix to reach for.
- Celebrating a low number from a boom. Peloton's monthly churn was 0.73% when I wrote the book. By its quarter to June 2026 it averaged 2.2%. Low churn measured in your best year isn't a law of nature.
Can churn rate be negative?
Customer churn can't. You can't lose fewer than zero customers.
Net revenue churn can, and that's the goal. The book's examples are SendGrid, whose net dollar retention was 112% in 2015, 111% in 2016 and 117% in 2017, and Shopify, which consistently reported revenue retention above 100%. Their existing customers grew faster than their leavers shrank them. See net negative churn.
What to do next
- Calculate all three numbers for last month: customer churn, revenue churn and net revenue churn.
- Go back twelve months and plot them. The trend matters more than any single month.
- Split by plan type (monthly versus annual) and by churn type (voluntary versus failed payment).
- Compare yourself with businesses at a similar price point using churn benchmarks by industry.
- Pick one fix for the biggest leak, and measure again in 30 days.
If your data lives in Stripe, you don't need a spreadsheet. Upload your export to the Stripe Export Analyser and it calculates churn and cohorts in your browser.
Calculate your churn in two minutes
Enter your customer and MRR numbers and the free Churn Rate Calculator shows customer churn, revenue churn and what churn is costing you each year.
Frequently asked questions
Can churn rate be over 100%?
Customer churn can't exceed 100%, because you can't lose more customers than you started with. If your number is above 100%, you're probably counting customers who joined and left within the same period. Exclude them, or measure over a shorter period. Revenue churn can't exceed 100% either, although net revenue churn can be negative when upgrades outweigh losses.
How do I calculate churn when some customers are on annual plans?
Annual customers can only leave at renewal, so a monthly churn figure that mixes them with monthly plans looks better than it is. Report the two groups separately. For annual plans, measure renewal rate: of the customers whose plans came up for renewal this month, what share renewed? That's the honest number for that group.
Should paused subscriptions count as churn?
Not at the moment they pause, but track them separately. A paused customer isn't paying, so exclude them from MRR, and decide in advance when a pause becomes churn (for example, if they don't restart within 90 days). Otherwise a generous pause option can hide churn that has already happened.
What's the difference between churn and attrition?
In subscription businesses they mean almost the same thing: customers who stop paying. Some teams use attrition for losses they can't control (a business closes down, a customer moves away) and churn for everything else. What matters is that you define it once, write it down and calculate it the same way every month.
How do I calculate churn from a Stripe or billing export?
Count active subscriptions on the first day of the month, then count how many of those were canceled or ended by the last day. Ignore subscriptions created during the month. For revenue churn, add up the MRR of those lost subscriptions plus any downgrades. A tool like the Stripe Export Analyser does this from a CSV in your browser.
Get both books free
The Subscription Playbook (ebook + audiobook) and Feed a Starving Crowd, instantly. In Australia? Claim the free hardcover.
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
- Recurly, Churn rate benchmarks (monthly-to-annual compounding note)
- Peloton, Q4 and FY2026 results (average net monthly churn)
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.