What this calculator does
This churn calculator converts customers lost into the figures that reveal what the loss actually costs. Enter customers at the start of the period, the monthly churn rate, and average revenue per customer, and it returns monthly revenue lost, the annual impact, and your retention rate, alongside a projection of how the base erodes over time.
Churn expressed as a percentage invites complacency. Three and a half percent sounds trivial. Translated into pounds per month and compounded over a year, it usually emerges as the single largest drag on growth in the business — larger than any acquisition channel is adding at the top of the funnel.
When to use it
Run it when choosing between acquisition and retention investment. The output makes the comparison concrete: if churn costs roughly £48,000 a year in lost recurring revenue, that figure can be set directly against the cost of a customer success hire or a rebuilt onboarding flow.
It is also the right tool for building a credible sales plan. Targets are routinely set on net growth without accounting for the customers who will leave in the meantime. Working out annual churn first tells you how many new customers are needed merely to stand still, which is a sobering but necessary place to begin.
Understanding the inputs
Customers at start is the count at the beginning of the period, excluding anyone who joins during it. Putting new signups into the denominator systematically understates churn, and the distortion is worst for fast-growing companies — exactly those that most need an accurate reading.
Monthly churn rate is customers lost divided by that starting count. If you sell annual contracts, calculate annual churn and convert rather than measuring monthly, which will read close to zero and tell you nothing. Average revenue per customer should be recurring subscription revenue net of VAT, excluding one-off setup fees that were never going to recur.
How is this calculated?
Churn Rate = (Customers Lost / Customers at Start) × 100. Annual Churn = 1 − (1 − Monthly Churn)^12. Revenue Churn = Customers Lost × Avg Revenue.
A worked example
A UK SaaS business begins the month with 1,200 customers paying £95 and loses 42. Monthly churn is 3.5 percent, retention 96.5 percent, and the immediate loss is £3,990 of monthly recurring revenue — around £47,900 on an annualised basis. Held at that rate, annual churn compounds to roughly 35 percent, or about 415 customers.
The growth implication is starker. To end the year 20 percent larger, at 1,440 customers, the business must win 240 net plus the 415 lost — roughly 655 new customers. Reducing churn to 2 percent would cut replacements to about 258, removing well over a third of the required sales effort.
Limitations and assumptions
The model applies one churn rate evenly across all customers, whereas real churn concentrates in the first 90 days and among smaller accounts. It measures logo churn rather than revenue churn, so it captures neither downgrades nor expansion, and a business with strong upsell will look worse here than it actually is.
It also assumes average revenue per customer stays constant, which drifts as the mix changes. For board reporting, add cohort retention curves and net revenue retention, which show whether churn sits in a particular cohort or is structural to the product. Use this calculator to size the problem rather than to diagnose it.
Common Questions
- What is a good SaaS churn rate?
- As a common rule of thumb, monthly logo churn under 2 percent is strong for SMB SaaS while 5 percent or more becomes difficult to sustain. Enterprise businesses on annual contracts measure annually, where 5 to 7 percent is generally acceptable. Consumer subscriptions run far higher and are not a fair comparison.
- How does monthly churn convert into an annual figure?
- It compounds rather than multiplying. Annual churn is one minus the monthly retention rate raised to the twelfth power. So 3.5 percent monthly is not 42 percent a year but about 35 percent, and 5 percent monthly becomes roughly 46 percent — close to half the customer base gone within twelve months.
- Should I track customer churn or revenue churn?
- Both, since they answer different questions. Logo churn shows whether the product holds users. Revenue churn shows whether the business holds money. A company shedding small accounts while growing large ones can post poor logo churn alongside excellent revenue retention, and that is not necessarily a problem.
- What is net revenue retention and why do investors focus on it?
- It combines churn, downgrades, and expansion into a single figure. Above 100 percent means the existing base grows faster than it leaks, so revenue rises even with no new sales. Investors weight it heavily because it distinguishes businesses that compound from those merely topping up a leaking bucket.
- How many new customers do I need just to stand still?
- At 3.5 percent monthly churn on 1,200 customers you lose around 415 in a year. Standing still means replacing every one before a single net addition counts. Calculating that explicitly reframes churn as a sales cost rather than a support issue, which usually changes where the budget goes.
- Why does churn cluster in the first 90 days?
- Because most cancellations trace to onboarding rather than the product. Customers who never reached a first meaningful result leave quickly. Separating new-cohort churn from mature-cohort churn typically reveals a steep early curve that flattens considerably, and it points investment directly at activation rather than features.
- Do annual contracts actually reduce churn?
- They delay and concentrate it rather than removing it. Annual terms eliminate eleven monthly cancellation opportunities and improve cash collection, but create a renewal cliff instead. Businesses that treat the contract as a substitute for engagement often find a whole year of churn arriving in one month.
- At what churn rate does the business stop working?
- When implied customer lifetime drops below CAC payback, the model fails at any volume. At 5 percent monthly churn the average customer lasts 20 months, so payback beyond that means acquisition cost is never recovered. That crossover is a far more useful warning than any published benchmark.
- Should failed payments be counted as churn?
- Track them separately as involuntary churn. Expired and declined cards commonly represent 20 to 40 percent of total churn in self-serve businesses, and it is the cheapest kind to fix. Dunning sequences, card updater services, and sensible retry logic recover a meaningful share without any product change.