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Churn and retention calculator
A three percent monthly churn sounds small. It means a third of your customers are gone within a year, and you have to replace them before you grow at all.
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Share of customers who leave each month.
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The ceiling nobody plans for
If you add twenty customers a month and lose three percent of your base, growth does not continue forever. It converges. New customers equal churned customers at a certain size, and at that point the business stops growing no matter how good the advertising gets.
That ceiling is simply new customers divided by churn rate. Twenty new a month at three percent churn settles at about six hundred and sixty customers. Doubling ad spend moves that to thirteen hundred; halving churn moves it to thirteen hundred as well — and halving churn is usually cheaper.
Acquisition raises the ceiling slowly and expensively. Retention raises it immediately and for free.
Why monthly churn is deceptive
Three percent a month does not mean thirty-six percent a year. It compounds: about thirty-one percent of customers are gone after twelve months. Five percent monthly leaves you with just under half your base after a year. Small-sounding monthly numbers are large annual ones.
What to look at before spending more
- When people leave. Churn concentrated in the first sixty days is an onboarding problem, not a product one.
- Which segments leave. Often one acquisition channel produces customers who churn at twice the rate. That channel is not cheap, it is expensive.
- Voluntary versus involuntary. A meaningful share of churn is failed payments. Card retries and dunning emails recover some of it for almost nothing.
Connect it to acquisition
Churn sets lifetime, lifetime sets what a customer is worth, and that sets what you can pay to acquire one. A business that halves its churn can afford to pay twice as much per customer, which usually unlocks channels that were previously unaffordable.
Feed the lifetime figure into the CAC payback calculator to see whether you recover acquisition cost before the average customer leaves.
Questions
Should I measure churn by customers or by revenue?+
Both. Customer churn tells you about the product; revenue churn tells you about the business. If small accounts leave and large ones stay, revenue churn is far better than customer churn and you should be optimising acquisition toward the larger ones.
What is a reasonable churn rate?+
It varies enormously by market. Small-business software commonly sits in the three to five percent monthly range; enterprise contracts far lower. Compare against your own trend rather than a benchmark from a different market.
Does negative churn exist?+
Yes — when existing customers upgrade enough to more than replace the revenue lost from leavers. It is the strongest position a subscription business can be in.
How does this apply to ecommerce?+
Replace churn with the share of customers who never reorder, and lifetime with expected number of orders. The logic is the same; the vocabulary differs.
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