To calculate churn rate, divide the customers you lost in a period by the customers you had at its start. Lose 5 of the 100 customers you started the month with and your churn is 5.0%.
One business in one month can report three different numbers. Customer churn is 5.0%, gross MRR churn is 5.5% and net MRR churn is 2.5%. Changing the period moves each of them again.
This page shows how to calculate churn rate for a SaaS business with monthly or annual billing. It gives the churn rate formula for customers, gross MRR and net MRR. Our churn rate calculator runs all three on your own numbers. You also get a worked MRR bridge whose rows add up, a monthly-to-annual table and a decision table for what counts as churned.
What Is a Churn Rate?
A churn rate is the share of customers or recurring revenue you lose in a set period. It always carries a period, such as a month, a quarter or a year.
How you calculate churn rate depends on which of three numbers you need:
- Customer churn: the share of accounts you lost, worked out in the next section.
- Gross MRR churn: the revenue lost to cancellations and downgrades, covered under revenue churn.
- Net MRR churn: gross MRR churn minus expansion revenue, shown in the worked bridge.
Churn and retention are complements: customer retention rate and churn rate add up to 100% over the same period.
SaaS Capital describes revenue churn as 1 minus gross retention and notes that gross retention cannot exceed 100%.
How to Calculate Customer Churn Rate
The customer churn rate formula is customers lost during the period divided by customers at the start of the period, times 100.
Customer churn rate = (customers lost during the period / customers at the start of the period) x 100
- Pick the period, such as one month, and write it down.
- Count the customers you had on the first day of the period.
- Count how many of those customers were lost by the last day.
- Divide the lost customers by the starting count and multiply by 100 to get the churn percentage.
To calculate monthly churn rate, take one month for a business that grows while it loses customers. It starts with 200, loses 10 and adds 30. The table divides the same 10 lost customers by three different counts.
| Denominator | Customers | Churn | Error |
|---|---|---|---|
| Customers at start | 200 | 5.00% | Correct |
| Customers at end | 220 | 4.55% | 0.45 points (9.1%) low |
| Start plus new | 230 | 4.35% | 0.65 points (13.0%) low |
Use the customers you had at the start, and keep customers added during the period out of both the numerator and the denominator.
The faster you grow, the bigger the error. Start with 100, lose 5 and add 50, and the end-count method shows 3.45% instead of 5.00%, which is 1.55 points, or 31.0%, too low.
To calculate subscriber churn rate, use the same formula with subscribers in place of accounts: 1,000 subscribers at the start and 40 cancellations is 4.0%.
All figures in this section come from our own example inputs, computed by script.
Takeaway: Divide by the count you started with, and keep new customers out until next period.
How to Calculate Revenue Churn Rate
Revenue churn rate measures the recurring revenue (MRR) you lose in a period as a share of MRR at the start of it. It differs from customer churn because accounts differ in size.
The table compares the three churn numbers by the question each answers, its formula, when to use it and its catch.
| Customer churn | Gross MRR churn | Net MRR churn | |
|---|---|---|---|
| Question it answers | How many logos left? | How much recurring revenue did we lose? | Did the existing base shrink or grow? |
| Formula | Lost customers / customers at start | (MRR lost to cancellations + MRR lost to downgrades) / MRR at start | (MRR lost to cancellations and downgrades minus expansion MRR) / MRR at start |
| Use it when | You track logo health and seat or account counts | You track revenue health and forecast | Expansion is a real motion for your team |
| The catch | A $200 account and a $20,000 account count the same | Ignores expansion, so it can look worse than the business is | Expansion can hide losing customers |
Gross MRR churn rate = (MRR lost to cancellations + MRR lost to downgrades) / MRR at the start of the period x 100. Expansion and new-customer MRR stay out of it.
Take $40,000 of MRR at the start, $1,300 lost to cancellations and $500 lost to downgrades. That is $1,800 lost, so gross MRR churn is 4.5%.
Net MRR churn also needs the expansion line, which the next section works through.
Gross vs Net MRR Churn: A Worked Example
Gross MRR churn shows the revenue you lost, and net MRR churn shows what the existing base did after expansion. Report both, and lead with gross when the question is revenue lost.
The bridge below follows one month for 100 existing customers, using our own inputs.
| Line | MRR |
|---|---|
| Start MRR | $100,000 |
| Cancellations (5 customers) | -$4,000 |
| Downgrades | -$1,500 |
| Expansion | +$3,000 |
| Win-backs (1 customer) | +$800 |
| End MRR | $98,300 |
The rows add up to end MRR: 100,000 – 4,000 – 1,500 + 3,000 + 800 = 98,300.
- Gross MRR churn: (4,000 + 1,500) / 100,000 = 5.5%.
- Expansion: 3,000 / 100,000 = 3.0%.
- Net MRR churn: (5,500 – 3,000) / 100,000 = 2.5%.
- Customer churn: 5 of 100 = 5.0%; 95 of the starting 100 remain, and with the 1 win-back, 96 customers are active at month end.
We keep win-backs out of both gross and net churn and give them their own row, so the table still sums. Netting the $800 in would show 1.7% net churn and hide a loss you already recorded.
In a second month, $3,000 of cancellations and $1,000 of downgrades meet $6,000 of expansion on $100,000 of starting MRR. Gross MRR churn is 4.0%, net MRR churn is -2.0% and net revenue retention is 102%.
Gross churn cannot go below zero; only net churn can. David Skok’s SaaS Metrics 2.0 calls a Dollar Renewal Rate above 100% negative churn.
We built one month for a 100-customer base from our own inputs and computed every figure with a script.
How to Convert Monthly Churn to Annual (and Back)
To convert monthly churn to annual, compound it, because each month’s churn applies only to the customers still left.
Annual churn = 1 – (1 – monthly churn)^12
The table shows compounded annual churn next to the multiply-by-12 shortcut for six monthly rates.
| Monthly churn | Compounded annual churn | Monthly x 12 | Overstated by (points) |
|---|---|---|---|
| 1% | 11.36% | 12% | 0.64 |
| 2% | 21.53% | 24% | 2.47 |
| 3% | 30.62% | 36% | 5.38 |
| 5% | 45.96% | 60% | 14.04 |
| 8% | 63.23% | 96% | 32.77 |
| 10% | 71.76% | 120% | 48.24 |
Multiplying by 12 overstates every row, and at 10% a month it gives 120%, a share no business can lose.
Multiplying monthly churn by 12 overstates annual churn more as churn rises
Points of overstatement against compounded annual churn, our calculation
| Item | Points of overstatement against compounded annual churn, our calculation |
|---|---|
| 1% | 0.64 |
| 2% | 2.47 |
| 3% | 5.38 |
| 5% | 14.04 |
| 8% | 32.77 |
| 10% | 48.24 |
To go the other way, use monthly churn = 1 – (1 – annual churn)^(1/12). A 30% annual churn rate is 2.93% a month, and 20% annual is 1.84% a month.
Here is how to calculate annual churn rate on annual contracts: use the cohort method. Count the customers you had at the start of the year who left by year end, then divide by the start-of-year count.
With 250 at the start, 40 lost and 60 new customers excluded, churn is 16.0%. Dividing by the 270 at year end would give 14.81%.
Use the cohort method for annual contracts and compound the monthly rate for monthly plans. Recurly, Jul 2026 notes that churn is typically calculated monthly or annually depending on your billing model.
The billing term can change the number itself. Customerscore.io, Jun 2026 found in its own analysis that monthly plans churned a median 4.7 times faster than annual plans for the same product.
Annual figures are computed with 1 – (1 – monthly)^12 and rounded to two decimals.
Takeaway: Match the method to the contract term before you convert.
What Counts as Churned?
Churn is whatever your counting rule says it is, so decide each event once and keep the rule fixed. Before you settle how to calculate churn rate, settle what counts as a lost customer.
The table decides how to measure churn event by event, for logo churn and for gross MRR churn.
| Event | Logo churn? | Gross MRR churn? | Rule to apply |
|---|---|---|---|
| Cancellation | Yes | Yes, full MRR | Count it in the period it takes effect |
| Non-renewal at contract end | Yes | Yes | Count it at the contract end date, not the notice date |
| Failed payment never recovered | Yes | Yes | Count it when the retry window ends and the account is cancelled or suspended |
| Failed payment recovered | No | No | Not churn |
| Pause | Only if it ends the subscription | Only if it ends the subscription | Our rule: otherwise report paused MRR on its own line |
| Trial that never converts | No | No | It was never a customer; track it in trial conversion |
| Downgrade | No | Yes, lost amount only | Count the lowered amount as gross MRR churn |
| Discount on an existing customer | No | Yes, if it lowers the recurring price | Show it as a downgrade row |
| Win-back | No | No | Log a reactivation row, not netted against churn |
| Customer acquired and lost in the same period | No, not in the start count | No | Report separately as short-lived |
Recurly lists expired cards, card updates not reflected in billing, bank fraud flags and insufficient funds at renewal as common causes of failed payments. Payments that dunning or retries recover inside the window are not churn, so count a failed payment only when the retry window ends.
Baremetrics’ method counts customers delinquent for more than 30 days as cancelled and calculates churn on a rolling 30-day window.
We count a pause as churn only when it ends the subscription, and we treat a discount on an existing customer as a downgrade row. These are our rules, not an industry standard.
Write your rule down, date it and keep it fixed between periods. Changing it between quarters changes the number without changing the business.
What Is a Good Churn Rate?
A good churn rate depends on the period, the segment and the stage. Segment means price point, contract term and company size. Compare your number only with a benchmark for the same period and customer type.
You can read a monthly rate as an annual one. A 5% monthly rate compounds to about 46% a year and implies a customer lifetime of 20 months (1 / 0.05). A 20% monthly rate is about 93% a year and a 5-month lifetime.
Here is how to calculate customer lifetime from churn rate: divide 1 by the monthly rate, as David Skok’s SaaS Metrics 2.0 does. The shortcut assumes the same churn every month.
Our rule: if CAC payback runs longer than the lifetime your churn implies, your churn is too high for what you pay for customers. Our CAC calculator with payback shows both from your numbers. At 5% a month, that lifetime is 20 months.
For benchmarks by segment and stage, look up the SaaS churn benchmarks by segment for your customer type and period.
Pick One Churn Number, State the Period, Then Compare
Knowing how to calculate churn rate comes down to one decision. Choose the number that matches your question, write the period and counting rule next to it, then compare like with like. Which of your three numbers does your team report today, and is the period written next to it?
Frequently Asked Questions About Churn Rate
What does 5% churn mean?
A 5% churn rate means you lose 5 of every 100 customers you started the period with. With 200 customers and a 5% monthly rate, you lose 10 in month one. If nobody joined, about 108 would remain after 12 months, so about 92 of the original 200 would be gone. The same reading applies to 10% or 20%, with a steeper decline.
Is a 5% churn rate good?
A 5% churn rate is good or bad depending on the period and segment, and the period matters most. A 5% yearly rate means losing 1 customer in 20 over twelve months. A 5% monthly rate compounds to 45.96% a year (1 – 0.95^12), so the same label can describe very different businesses. Compare only against companies with the same customer type, contract term and size.
Is a high churn rate always a bad thing?
A high churn rate is not always bad. Healthy churn sheds customers who do not fit your product or cost more to serve than they bring in. Harmful churn loses long-lifetime accounts that are expensive to replace. A simple test is whether you would spend money to win that customer back. If the answer is no, losing them may be the right outcome.
How do you calculate churn rate as an average?
Average churn rate over a year is the mean of the 12 monthly rates. It is a monthly average, not an annual rate, so do not multiply it by 12. For the annual figure, use the cohort method. To express a yearly rate as a monthly average, apply the reverse formula: 1 – (1 – annual churn)^(1/12).
Can you have negative churn?
Negative churn means the recurring revenue from your existing customers grows even with no new sales. This happens when expansion MRR exceeds the MRR you lost, so only net churn can turn negative. Check the sign before you celebrate: a negative net figure can still sit on top of lost customers, so read it next to customer churn.
Why does 1 divided by churn rate give customer lifetime?
One divided by monthly churn gives customer lifetime because a constant share leaves each month. The average customer then stays 1 divided by that share, in months. David Skok’s example is 3% monthly churn, which gives about 33 months. The shortcut breaks when churn differs by cohort, by season or by customer age, so treat the result as an approximation.
How do you calculate churn in a business with no subscriptions?
To calculate churn without subscriptions, set an inactivity window: a set period with no purchase after which a customer counts as lost. Write that window down, because the number changes with it. Then apply the same start-of-period formula: customers active at the start who passed the window without buying, divided by customers active at the start.
How often should you measure churn rate?
Measure churn rate monthly if you run monthly subscriptions, which suits most subscription teams. Teams on annual contracts can measure quarterly or annually, since most customers have no renewal decision in a given month. Whatever you choose, keep the period fixed when you compare, because a monthly figure and a quarterly figure for the same business are not comparable.
What is the difference between churn rate and retention rate?
Churn rate is the share of customers you lost, and retention rate is the share you kept over the same period. The two add up to 100%. Retention shows compounding well: at 5% monthly churn, about 54% of customers remain after 12 months (0.95 to the 12th power).
Can churn rate be higher than 100%?
Customer churn cannot exceed 100% when the denominator is customers at the start and only those customers count as lost. A figure above 100% means new customers were counted as lost, or the multiply-by-12 shortcut was used instead of compounding. Check both before you report it, because either error inflates the number past what a business can actually lose.
