What is churn rate?

Churn rate is the percentage of customers who stop doing business with a company during a specific period. It is commonly used to measure customer loss and is particularly important for subscription, recurring-order, and B2B businesses.

A basic customer churn rate formula is:

Churn Rate = (Customers Lost During the Period ÷ Customers at the Start of the Period) × 100

For example, if a B2B company starts a month with 1,000 customers and 50 customers stop purchasing or terminate their accounts during that month:

Churn Rate = (50 ÷ 1,000) × 100 = 5%

Businesses can use churn rate to:

• Monitor customer losses over time.
• Identify retention problems.
• Evaluate customer service and onboarding.
• Analyze customer segments with higher churn.
• Improve retention and re-engagement strategies.
• Estimate potential effects on customer lifetime value (CLV).
• Support revenue and sales forecasting.

The exact definition of “churn” depends on the business model. For example, a subscription company may count canceled subscriptions, while a B2B company may define churn as contract termination or a customer becoming inactive for a specified period.

Churn rate should be interpreted alongside retention rate, repeat purchase behavior, CLV, and revenue churn, because losing a small number of high-value customers can have a different financial impact than losing many low-value customers.