Monthly Churn Rate Calculator
This means you are losing of your customer base monthly.
Understanding Monthly Churn Rate
In the world of SaaS (Software as a Service) and subscription-based businesses, Monthly Churn Rate is arguably the most critical metric to track. It represents the percentage of your customers who cancel or fail to renew their subscription within a given month.
While acquiring new customers is important, retaining existing ones is often more cost-effective. A high churn rate indicates that although you might be adding new users, you are losing existing ones just as fast—a phenomenon often referred to as a "leaky bucket."
How to Calculate Churn Rate
The standard formula for calculating monthly customer churn is relatively straightforward. It focuses on the number of customers lost relative to the number of customers you had at the beginning of the period.
Churn Rate = (Customers Lost During Month / Customers at Start of Month) × 100
Real-World Example
Let's apply this formula to a realistic scenario to see how it works:
- Start of Month: You begin June with 1,000 active subscribers.
- During the Month: Throughout June, 50 customers cancel their subscriptions.
- New Customers: You gain 80 new customers (note: new customers acquired during the month are typically excluded from the denominator of the basic churn calculation to avoid skewing the data).
Calculation:
(50 / 1,000) × 100 = 5%
In this example, your monthly churn rate is 5%. This implies that the retention rate is 95%.
Why Is This Metric Critical?
Tracking churn allows businesses to:
- Forecast Revenue: Knowing your churn helps in predicting Monthly Recurring Revenue (MRR) stability.
- Evaluate Product Health: A sudden spike in churn often correlates with product bugs, price changes, or competitive shifts.
- Calculate LTV: Customer Lifetime Value (LTV) is directly impacted by churn. The lower the churn, the higher the LTV.
Acceptable Churn Benchmarks
Benchmarks vary significantly by industry and company size:
- Enterprise SaaS: Often aims for less than 1% monthly churn.
- SMB SaaS: Typically sees monthly churn between 3% and 7%.
- B2C Subscriptions: Can often be higher, sometimes ranging from 5% to 10% depending on the service utility.
Reducing Your Churn Rate
To improve your metrics, focus on customer success. Ensure your onboarding process is smooth, offer proactive support, and regularly gather feedback to understand why customers are leaving. Analyzing "exit surveys" is often the first step in plugging the leaks in your bucket.