Example: If you started the month with 200 customers and 8 of them cancelled, your monthly churn rate is 4%.
Why Churn Rate matters
Churn works against growth in a subscription business. Every cancellation has to be replaced before your revenue can grow, so a high churn rate makes growth expensive and a low one makes it compound.
Small differences add up. A monthly churn rate that looks modest can mean losing a large share of your customers over a year, which is why churn is usually tracked month by month and by customer group.
How to read it
There is no universal target. Acceptable churn depends on your price point, customer size and contract length. Businesses selling to larger companies on annual contracts typically see lower churn than those selling low-priced monthly plans to individuals.
Compare against your own trend and against customers who joined in the same period. Falling churn is a good sign even if the absolute number is not yet where you want it.
How to improve it
- Find out why customers leave by asking them when they cancel.
- Improve onboarding so new customers reach their first success quickly.
- Recover failed payments with automatic retries and reminder emails.
- Offer a pause option or a lower plan instead of a full cancellation.
- Offer annual plans to customers who are happy, since they commit for longer.
Common mistakes
- Counting customers who joined during the month in the starting number.
- Mixing up customer churn and revenue churn, which can differ a lot when large customers leave.
- Treating failed card payments as real cancellations without checking.
- Looking only at the blended number and not at churn by plan or signup month.
“What was my monthly churn rate for the last six months, and which plans have the highest churn?”
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