Churn rate is the percentage of customers or users who stop using a product, cancel a subscription, or become inactive during a specific time period, calculated as the number lost divided by the number present at the start of that period.
Churn is typically tracked monthly or annually and comes in a couple of common variants — customer churn, the percentage of accounts that cancel, and revenue churn, the percentage of recurring revenue lost, which weights larger accounts more heavily — and the two can tell noticeably different stories. Even a seemingly small monthly churn rate compounds significantly over a year, which is why subscription businesses treat modest reductions in churn as having an outsized long-term impact.
A subscription service with 1,000 customers at the start of the month that loses 30 customers to cancellation by month's end has a monthly churn rate of 3% (30 divided by 1,000).
It depends heavily on the business model — consumer subscription apps often tolerate higher monthly churn than B2B software with annual contracts, so churn benchmarks are typically compared within a similar business type.
Customer churn counts the percentage of accounts lost regardless of size, while revenue churn weights that loss by the recurring revenue each canceled account represented, so losing a few large customers can produce high revenue churn even with low customer churn.
Revenue churn can technically go negative when expansion revenue from existing customers, like upgrades, outweighs revenue lost from cancellations in the same period, a state often called 'negative churn' and considered a strong sign of business health.