Definition
Churn rate is the percentage of customers (or revenue) that you lose during a given period, typically measured monthly or annually. If you start the month with 200 customers and lose 10, your monthly churn rate is 5%.
There are two flavors:
- Customer churn: Percentage of customers who leave (also called logo churn)
- Revenue churn: Percentage of MRR lost from cancellations and downgrades. This is usually more meaningful because losing a $50K/year client hurts more than losing a $500/year client
Why It Matters
Churn is the silent killer of growth businesses. A 5% monthly churn rate sounds small, but it means you lose nearly half your customer base every year. To grow, you need to replace all those lost customers and add new ones on top. It's like running on a treadmill — you have to keep moving just to stay in place.
Churn also directly impacts the value of your customer acquisition cost. If you spend $1,000 to acquire a customer who churns in 3 months, you probably didn't earn back that investment. If they stay for 3 years, you did. The relationship between churn and CAC determines whether your growth engine is profitable or just expensive.
Example: A SaaS company with $100K MRR and 3% monthly churn loses $3K in recurring revenue every month. Over a year, that's $36K in lost MRR — plus the compounding effect. To grow MRR to $150K, they don't just need $50K in new business. They need roughly $86K to cover churn and hit the target.
How to Calculate It
Customer Churn Rate = (Customers Lost During Period / Customers at Start of Period) x 100
Revenue Churn Rate = (MRR Lost from Cancellations & Downgrades / MRR at Start of Period) x 100
How CentSight Helps
CentSight tracks both customer and revenue churn by analyzing your recurring billing data. It identifies churn trends over time and can break down churn by customer segment, contract size, or acquisition channel. Ask “What's our churn rate trending?” and CentSight shows you whether retention is improving or slipping — and which customer cohorts are driving the change.