Churn Rate is the percentage of customers, or of recurring revenue, lost during a period, calculated as the customers lost in the period divided by the customers at the start of it.
Also called attrition rate, churn is most visible in subscription businesses such as software, media, and telecommunications, where customers cancel explicitly. A company that starts a month with 500 subscribers and loses 50 has a 10% monthly churn rate. Customer churn counts accounts lost; revenue churn counts recurring revenue lost, and net revenue churn offsets those losses with expansion from remaining customers, so it can turn negative. Its complement is retention: 10% monthly churn is 90% monthly retention.
Churn sets the expected length of a customer relationship. The reciprocal of monthly churn approximates average customer life in months, so 5% monthly churn implies about 20 months, which makes churn a direct input to 📝Lifetime Value (LTV) and to the 📝LTV:CAC ratio. In non-subscription commerce, where customers leave silently, the same idea is expressed through the repeat purchase rate. Averaging churn across all customers can hide very different cohorts; the 📝Magic Cohort shows how excluding early leavers inflates the apparent economics.
Churn rate is one of the 📝Level 1 Metrics used to forecast a subscription business in an 📝Integrated Financial Model (IFM).
Churn is how I explain the difference between forecasting and managing. Level 1 metrics care about churn rate; Level 2 metrics care about the quality of service that causes it.