What is Churn Rate?

Churn rate measures how quickly you're losing customers. Monthly churn rate is calculated as: (customers lost during the month ÷ customers at the start of the month) × 100. A 5% monthly churn rate means 5 out of every 100 customers cancel each month — which compounded means you're replacing your entire customer base roughly every 20 months just to stay flat.

Churn comes in two forms: voluntary churn (customers actively cancel because they're not getting value, found a competitor, or their budget changed) and involuntary churn (customers are lost due to payment failures — credit card declines, expired cards — without an intent to cancel). Involuntary churn often accounts for 20–40% of total churn for subscription businesses and is the easiest to recover through dunning sequences and payment retry logic.

Beyond simple customer churn, subscription businesses track revenue churn — the percentage of MRR lost due to cancellations and downgrades. If high-value customers are churning at higher rates than low-value customers, revenue churn will exceed customer churn. Net revenue retention (NRR) adds expansion revenue (upsells, seat additions) to the picture — a NRR above 100% means existing customers are generating more revenue over time, creating growth even without new customer acquisition.