Churn Rate Calculator
Calculate customer churn rate and its impact on MRR and LTV.
What this calculator does
This churn calculator turns customers lost into the figures that show what that loss costs. Enter customers at the start of the period, the monthly churn rate, and average revenue per customer, and it returns the monthly revenue lost, the annual revenue impact, and the retention rate, along with a projection of how the customer base declines over time.
Churn expressed as a percentage is easy to dismiss. Two and a half percent sounds like a rounding error. Converted into dollars per month and compounded across a year, it usually turns out to be the largest single drag on growth in the business — larger than any channel is contributing at the top.
When to use it
Run it when you are deciding where to invest between acquisition and retention. The output makes the comparison concrete: if churn costs $108,000 a year in lost revenue, that number can be set directly against the cost of a customer success hire or an onboarding rebuild.
It is also the right tool for setting a realistic sales target. Sales plans are frequently built on net growth without accounting for the customers who will leave along the way. Calculating annual churn first tells you how many new customers are needed simply to hold position, which is usually a sobering and necessary starting point.
Understanding the inputs
Customers at start should be the count at the beginning of the measurement period, excluding anyone who signs up during it. Including new signups in the denominator systematically understates churn, and the effect is largest for fast-growing companies — precisely those most in need of an accurate number.
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 near zero and mean nothing. Average revenue per customer should be recurring subscription revenue, excluding one-time fees that would not have recurred anyway.
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 SaaS business starts the month with 2,400 customers at $150 a month and loses 60 of them. Monthly churn is 2.5 percent, retention 97.5 percent, and the immediate revenue loss is $9,000 a month. Held at that rate, annual churn compounds to roughly 26 percent — about 630 customers and around $108,000 of annualized recurring revenue.
The growth consequence is sharper still. To finish the year 20 percent larger, at 2,880 customers, the business must win 480 net plus the 630 lost — roughly 1,110 new customers. Cutting churn to 1.5 percent would reduce the replacement burden to about 400, taking nearly a fifth off the required sales effort.
Limitations and assumptions
The model applies one churn rate uniformly across all customers, when in practice churn concentrates heavily in the first 90 days and among smaller accounts. It measures logo churn rather than revenue churn, so it misses both downgrades and expansion, and a business with strong upsell can look worse here than it truly is.
It also assumes constant average revenue per customer, which drifts as your mix shifts. For board reporting, supplement it with cohort retention curves and net revenue retention, which show whether the churn is a leak in a specific cohort or a structural property of the product. Use this calculator to size the problem, not to diagnose it.
Common Questions
- What is a good SaaS churn rate?
- As a common rule of thumb, under 2 percent monthly logo churn is strong for SMB SaaS and 5 percent or more becomes hard to sustain. Enterprise businesses on annual contracts usually measure annually, where 5 to 7 percent is considered acceptable. Consumer subscriptions routinely run far higher and are not comparable.
- How does monthly churn convert to annual?
- It compounds, not multiplies. Annual churn equals one minus the monthly retention rate raised to the twelfth power. So 2.5 percent monthly is not 30 percent annually but about 26 percent, and 5 percent monthly becomes roughly 46 percent — nearly half your customer base gone in a year.
- Should I measure customer churn or revenue churn?
- Both, because they answer different questions. Logo churn tells you whether the product retains users. Revenue churn tells you whether the business retains money. A company losing many small accounts while growing its large ones can have terrible logo churn and excellent revenue retention, and that is not a crisis.
- What is net revenue retention and why does it matter more?
- Net revenue retention combines churn, downgrades, and expansion into one figure. Above 100 percent means existing customers grow faster than others leave, so revenue increases even with zero new sales. Investors weigh it heavily because it separates businesses that compound from those that merely refill a leaking bucket.
- How much new business do I need just to stand still?
- At 2.5 percent monthly churn on 2,400 customers you lose roughly 630 over a year. Standing still means replacing all of them before a single net new customer counts. That figure is worth calculating explicitly, because it reframes churn as a sales cost rather than a support problem.
- Why is churn concentrated in the first 90 days?
- Because most cancellations trace back to onboarding rather than the product itself. Customers who never reached their first meaningful outcome leave quickly. Splitting churn into new-cohort and mature-cohort rates usually shows a steep early curve flattening substantially, and it points investment squarely at activation.
- Does an annual contract actually reduce churn?
- It delays and concentrates it rather than eliminating it. Annual terms remove eleven monthly opportunities to cancel and improve cash collection, but they also produce a renewal cliff. Businesses that treat an annual contract as a substitute for engagement often discover the whole year's churn arriving in a single month.
- What churn rate makes a business unviable?
- When implied customer lifetime falls below the CAC payback period, the model does not work at any volume. At 5 percent monthly churn the average customer lasts 20 months, so any payback beyond that means you never recover acquisition cost. That intersection is a more useful alarm than any benchmark.
- Should involuntary churn be counted separately?
- Yes. Failed card payments and expired cards commonly account for 20 to 40 percent of total churn in self-serve businesses, and it is the cheapest churn to fix. Dunning emails, card updaters, and retry logic recover a meaningful share without touching the product at all.