Churn Rate Formula: Customer and Revenue Churn Explained
The churn rate formula is: customers lost during a period divided by customers at the start of that period, times 100. For example, if a hypothetical app starts the month with 200 paying customers and 10 cancel, its monthly customer churn rate is 10 / 200 = 5%.
That is the short answer. The longer one is that “churn” covers two or three different numbers, and the one you pick changes the story your dashboard tells. This guide gives each formula, a worked example, and the common mistakes that make churn look better or worse than it is. A note on bias: we make Indiehacker Studio, a tool that does this for small apps; the method below works with any tool or a spreadsheet.
What is the basic churn rate formula?
Customer churn rate counts people, not money:
Customer churn rate = churned customers in the period / active customers at the start of the period
Three counting rules:
- Count paying customers only at the start. Trials and free accounts are not in the denominator. A trial that never converts is a lost trial, not a churned customer.
- Only count customers who were there at the start. Someone who signs up on the 10th and cancels on the 25th distorts the rate if you count them as churned but not as a starting customer. ChartMogul’s customer churn definition removes those “joined and churned” customers from the numerator for that reason.
- Use one period length and stick to it. Monthly is common for small SaaS. Mixing a 28-day February with a 31-day March is fine; mixing monthly and quarterly is not.
How do you calculate revenue churn?
Customer churn treats a $5 customer and a $500 customer the same. Revenue churn weighs them by what they pay:
Revenue churn rate = churned MRR in the period / MRR at the start of the period
As a made-up example: if an app starts with $4,000 in MRR and the subscriptions that ended were worth $200 a month, revenue churn is 200 / 4,000 = 5%. If the customers who left were mostly on your cheapest plan, revenue churn will sit below customer churn.
You need MRR to be right before revenue churn means anything. Yearly plans must be divided by 12, discounts subtracted and trials counted at zero. Our guide on how to calculate MRR from Stripe walks through those rules.
What is the difference between gross and net MRR churn?
Revenue churn has two versions, and investors and founders mean different things by each:
| Formula | Numerator | What it tells you |
|---|---|---|
| Customer churn | Customers who left | How many people leave |
| Gross MRR churn | Churned MRR + contraction MRR | How much money leaks out, before any upside |
| Net MRR churn | Churned + contraction MRR, minus expansion MRR | Whether existing customers grow or shrink overall |
All three divide by the value at the start of the period. The gross MRR churn formula ChartMogul uses on its revenue churn page is (churn MRR + contraction MRR) / MRR at the start of the period. Net churn subtracts expansion, so it can go below zero. Negative net churn means upgrades from existing customers outweighed what you lost in that period.
Can you walk through a churn rate example?
Here is an example month for a small app (made-up numbers to show the math, not real data):
| Item | Value |
|---|---|
| Paying customers on the 1st | 120 |
| MRR on the 1st | $1,800 |
| Customers who cancelled during the month | 6 |
| MRR of those cancelled subscriptions | $72 |
| Downgrades (contraction) | $18 |
| Upgrades (expansion) | $45 |
- Customer churn: 6 / 120 = 5.0%
- Gross MRR churn: (72 + 18) / 1,800 = 5.0%
- Net MRR churn: (72 + 18 − 45) / 1,800 = 2.5%
Same month, three numbers. If you only looked at net MRR churn you would say “2.5%, fine.” If you only looked at customer churn you would say “one in twenty people left.” Both describe the same month. For more worked cases, see the churn rate calculator examples.
Which churn mistakes skew the number?
- Counting trials. A trial that ends without paying is a conversion problem, not churn. Keep trial conversion as its own number.
- Counting past due as churned. A failed card is not a cancellation yet. Stripe keeps the subscription
past_duewhile it retries; count it as churn only when the subscription ends. - Mixing yearly plans into monthly churn the wrong way. A yearly customer can only churn at renewal. If half your customers are yearly, your monthly churn will look low in most months and spike in renewal months. Look at a longer window or split by billing interval.
- Tiny denominators. With 20 customers, one cancellation is 5% churn. Read small-sample churn as a signal to talk to the customer who left, not as a trend.
- Dividing by end-of-period customers. It inflates churn when you are growing and hides it when you are shrinking. Use the start instead.
How does churn connect to retention?
Retention is roughly the other side of the same coin: if 5% of customers left, about 95% stayed. The two diverge once you add new customers, expansion and reactivations into the mix. We cover the details in churn rate vs retention rate. For typical ranges by price point, see our roundup of SaaS churn rate benchmarks.
FAQ
Is churn rate monthly or annual?
Either, as long as you say which. Many small SaaS products track monthly churn. Annual churn is not monthly churn times 12: 5% monthly churn compounds to about 46% of customers lost in a year (1 − 0.95¹²).
Do refunds count as churn?
A refunded subscription that also ends counts as churn on the day it ends. The refund itself is a revenue event, not a churn event.
What about customers who come back?
Count a reactivation as new (or reactivation) MRR when it starts paying again. Do not erase the original churn.
Which churn number should a solo founder watch?
Customer churn and gross MRR churn, monthly. Add net MRR churn once you have upgrades or seats. Our list of SaaS metrics worth tracking puts them in context.
Track churn without a spreadsheet
Indiehacker Studio reads your Stripe subscriptions with a read-only restricted key and keeps a daily snapshot per project. On the revenue page you get MRR, ARR, active subscriptions, trials, customer churn (churned customers over active at the start of the last 30 days) and revenue churn (churned MRR over MRR at the start), plus new, expansion and contraction MRR. Trials count at zero and past due subscriptions still count as paying. The page has no cohort charts or forecasts yet; it shows the last 30 days.
Revenue is part of Pro, which also covers cookieless analytics, a support chat bubble, feedback and bug reports for up to 50 projects from one script. See pricing or create a free account and try Pro free for 14 days.