Churn Rate Calculator
Want to know how to calculate Churn Rate? Churn Rate is a good indicator of how successful or useful your products and services are
(customers lost / initial customers) x 100 = Churn rate
What is Churn rate?
Churn Rate, also known as attrition rate, is the percentage of customers who stop purchasing your product or stop using your service within a specific time period. It is a good indicator of how successful or useful your products and services are. If your churn rate is low, it means you’re keeping a high percentage of your clients – so the lower your churn rate, the better! A high churn rate indicates that you’re losing clients quickly, which is most likely due to the quality of your products or services, giving you an insight into what you need to improve.
The involuntary churn rate is the percentage of customers that cancel their services or product purchases due to factors out of their control, such as relocation. The voluntary churn rate is the percentage of customers who end their contracts or stop purchasing your products because they are unhappy with their quality. This churn rate is preventable by your company through improving your products and services.
Revenue churn rate is the measure of how quickly you lose profit due to these customers canceling their services. The gross revenue churn rate measures how much money you lost as a result of the cancelation. The net revenue churn rate measures the total income lost due to these cancelations, minus the income obtained due to other people signing up to your services or purchasing your products.
In summary, customer churn rate is the number of customers you lose over a specific period. Revenue churn rate is the proportion of income lost over the same time period.
How to Calculate Churn rate
You can calculate your customer churn rate using this formula:
[(Customers at beginning – customers at end) / customers at end] x 100
This can also be written as:
(Customers lost over a period of time / Customers had at the beginning of that period) x 100
For example, if you had 500 customers at the beginning, and 450 remaining at the end of the time period, 50 customers cancelled their services. Using the formula, your churn rate would be:
(500-450) / 500 = 0.1
0.1 x 100 = 10%
This means that you lost 10% of your customers during this timeframe.
To calculate your revenue churn rate, you can use a similar formula.
(Income lost over a set period / Total income at the beginning of that period) x 100
For example, your company had $500,000 annual recurring income. You lost $20,000 due to cancellations. Using the formula, your churn rate would be:
20,000 / 500,000 = 0.04
0.04 x 100 = 4%
To calculate churn rate in Excel or Google Sheets, follow these steps:
- Input the number of customers lost during a specified period in one cell
- Input the total number of customers at the start of this period in a second cell
- In a third cell, input the formula (A1/A2)
