What is the formula for churn rate?
Churn Rate = (Customers Lost ÷ Customers at Start) × 100.
Example: 1,000 starting customers, 35 lost = 3.5% monthly churn.
The denominator is always starting customers, not ending customers.
How to annualize monthly churn (the correct way)
Do not multiply by 12. Use compounding:
Annual Churn = 1 − (1 − Monthly Churn)^12
| Monthly | ×12 (Wrong) | ^12 (Correct) |
|---|---|---|
| 2% | 24% | 22% |
| 5% | 60% | 46% |
| 7% | 84% | 58% |
5% monthly churn = 46% annual loss, not 60%. The base shrinks each month, so the loss compounds downward.
What is a good churn rate?
| Industry | Average Monthly | Top Quartile |
|---|---|---|
| B2B SaaS | 3–5% | 1–2% |
| B2C SaaS | 5–7% | — |
| E-commerce Subscriptions | 6–8% | — |
Above 7% monthly (84% annualized) is unsustainable.
Gross vs. net churn
- Gross churn: customers lost ÷ starting customers
- Net churn: gross churn − expansion revenue
5% gross + 8% expansion = −3% net churn (revenue grows). NRR >100% is healthy.
LTV formula
Simple LTV = ARPU ÷ monthly churn. $49 ARPU ÷ 3.5% = $1,400 LTV.
Free calculator
A churn rate calculator that handles all of this automatically — compound annualization, 5-industry benchmarks, LTV estimate. Runs in your browser, no signup, data stays local.
Sources: ProfitWell 2025, ChartMogul 2025, OpenView SaaS Benchmarks.
Disclosure: This contains affiliate links. If you sign up through these links, we may earn a commission at no extra cost to you.
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