Churn rate

When you have an online business, you might lose some clients. The goal, though, is to lose fewer clients than acquire them. One of the most critical customer metrics is the churn rate. Here’s everything you need to know.


What is a churn rate

The churn rate, sometimes known as the attrition rate, is the rate at which customers stop doing business with a company over a given period of time. In addition, you will sometimes hear the term custom churn, which refers to the cycle of acquiring and losing customers.

Generally speaking, the less churn you have, the more customers you keep.

How to calculate the churn rate

The churn rate calculation is fairly easy. You need to take all your monthly recurring revenue (MRR) at the beginning of the month and divide it by the monthly recurring revenue you lost that month — minus any upgrades or additional revenue from existing customers.

You can also calculate the Annual churn rate, which refers to the percentage of customers lost over the course of a year. Instead of the monthly customer, look at the number of customers you had at the beginning of the year; then at the number, you had at the end of the year.

The monthly customer churn rate formula:

Customer churn rate : (customer beginning of the month-customer end of the month) / customers beginning of the month

What is a good churn rate

The lower the average churn rate, the better! A good churn rate benchmark is from 2% to 8%, especially for B2C SaaS businesses. This indicates the business's financial health, but this number can vary according to the business model and other factors. Startups usually have higher churn rates at the beginning, which is expected as they try to find their product/market fit.

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What is a bad churn rate?

If you have a high churn rate of 8% or more, you might wonder why customers are leaving. You can do surveys, review internal processes, and conduct exit interviews with churned customers to see where you can improve.

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Churn rate examples & templates

Your customer data can be tracked in reports filled with important metrics for your objectives. Here are a few examples:

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Executive report template Executive report template

This dashboard template is filled with metrics your C-suite will want to see. Show them your revenue, new customers, churn rate, downgrades, and more. You can also add some cohort analysis, customer satisfaction KPIs, gross margin, or customer data for a better overview.

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Google Analytics report template Google Analytics report template

Check the total number of customers, traffic, customer journey through your website, and more with this easy-to-use GA template. This template is great for optimizing your customer success.

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Ecommerce report template Ecommerce report template

A report with all the most important metrics for your eCommerce site, like shopping cart abandonment, click-through rate, and revenue over a specific period.

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Churn rate best practices

Here are some best practices you should keep in mind to improve your data, like customer retention, monthly churn rate, and much more.

Conversion rate best practices

step 1 icon Invest in customer experience

New customers need to become loyal customers. So how do you achieve that? By investing in customer support, listening to customer feedback, and a good onboarding process. The bottom line, offering a better customer experience will help your buyers stay longer.

step 2 icon Create a loyalty program

Customer loyalty is crucial to achieving a lower churn rate, and customer relationship is one of the many ways to improve it. Creating a loyalty program can drastically improve your retention rate, purchase frequency, and average customer lifespan.

step 3 icon Provide resources and education

Another great way to improve purchase frequency and customer profitability is to provide education and resources to your current customers. For example, if you’re a Saas company, your customer base might want to leave if they don’t know how to use your product, so it’s crucial to provide enough information to use it to its full potential.

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