How the customer churn rate calculator works
Customer churn measures the proportion of starting accounts that leave during a period. This tool uses a monthly starting cohort, which keeps new acquisition out of the denominator. Adding new customers during the month does not undo the loss of an account that was present at the start.
Starting-cohort retention is the complement of churn. The annual scenario compounds the same monthly churn for twelve months, representing repeated attrition from the surviving cohort. It is different from multiplying monthly churn by twelve, which can overstate annual losses and even produce impossible rates above 100%.
Monthly churn = lost starting customers ÷ starting customers; annual scenario = 1 − (1 − monthly churn)^12
Worked example
Start with the example inputs below. The calculator opens with these values; reset the example at any time to compare your own scenario.
| Measure | Value |
|---|---|
| Customers at start of month | 200 |
| Starting customers lost this month | 10 |
| Measure | Value |
|---|---|
| Monthly customer churn | 5% |
| Starting-cohort retention | 95% |
| Compounded annual churn scenario | 45.96% |
New customers are excluded from the starting cohort. Annual churn assumes this monthly rate repeats for twelve months.
How to use the result
Define when an account is considered lost: cancellation, service expiry or another documented event. Use that definition consistently across reporting periods. Track acquisition and reactivation separately so the customer count reconciles without changing what the churn metric means.
Review churn by tenure, plan and acquisition source. An overall average can conceal a poor onboarding experience for new customers or a renewal problem among older accounts. Use the monthly rate to investigate those patterns rather than treating every loss as the same event.
Assumptions and common mistakes
The compounded annual number is a scenario, not an observed annual report. It assumes the same rate repeats each month and does not account for seasonality or changes in customer mix. This is logo churn; revenue churn requires the recurring value of lost or reduced subscriptions.