What is churn?
Churn means lost money or customers. Typically this is due to downgrades and cancellations, but there are other causes as well. Customers who are delinquent for more than 30 days are considered to have canceled.
Churn is typically presented as a percentage of either revenue or customers lost in a given time frame.
A 5% User Churn Rate means that 5% of the total customers you had 30 days ago have canceled within the last 30 days.
A 5% Revenue Churn Rate means that you lost 5% of your MRR as it stood 30 days ago to churn in the past 30 days.
How is churn calculated?
Here is how churn is calculated for annual plans.
(Cancelled Customers in the last 30 days ÷ Active Customers 30 days ago) x 100
(MRR Lost to Downgrades & Cancellations in the last 30 days ÷ MRR 30 days ago) x 100
What about annual plans?
Great question! Annual plans work a bit differently. In the case of an annual plan (or any plan that is not monthly, actually) you use the same formula but with a different date interval.
(Cancelled customers in the last 365 days ÷ Active Customers 365 days ago) x 100
Annual plans that have been around for a year or less will often have a bit of a goofy churn rate, as there simply isn't enough historical data available yet.
Which type of churn is more important?
This is a tough question! Both user and revenue churn absolutely have their place.
However, revenue churn is generally the one you want to focus on more, especially if you have lots of plans. Losing customers is always bad, but the value of the customers you are losing is important to monitor.
A revenue churn rate that is higher than your user churn means that you are losing high-value customers more.
Help! My churn is really high! What do I do?
Check out the Slaying the Churn Beast in the Baremetrics Business Academy to learn some ways to tackle churn.
How do I learn more about my churn rate?
We give you a ton of great ways to investigate your churn.
Knowing the rate at which folks churn is valuable, but finding out when they churn is even more valuable. Cohorts will help you do that.
Keep a close eye on the churn rate of your most valuable plans. These folks are vital to your business. They likely bring in the bulk of your revenue and have a lower overhead than other customers. Keep them happy!
See how your churn is doing relative to say, 6 months ago.
Maybe you read our Business Academy article on churn and you've put a few of our suggestions into practice. Set a goal to reduce churn, and keep an eye on how it's going.
Release a highly requested feature that you think is going to keep folks around? Note it and watch to see if it's having the desired impact.
Churn is highly prone to statistically random fluctuations, especially in small sample sizes. Just because your churn rate is high right now doesn't mean you're doing anything wrong–it could just be an anomaly!
Use trend lines to monitor your churn over a longer date range and see how it's trending.