How do you calculate churn rate?
The one-line formula: churn rate = customers lost during the period ÷ customers at the start of the period × 100. Start January with 200 customers, end it with 190 of the original 200 still paying, and monthly churn is 10 ÷ 200 = 5%. Swap customers for MRR and the same formula gives revenue churn. Keep customers acquired mid-period out of the denominator — counting them flatters the number and hides the trend.
Customer churn vs revenue churn: what's the difference?
Customer churn counts accounts; revenue churn counts money. Lose ten starter-plan customers and one enterprise account, and customer churn treats them as eleven equal losses — revenue churn shows which one hurt. Revenue churn also splits into gross (revenue lost to cancellations and downgrades) and net (the same figure minus expansion revenue from upgrades). Net revenue churn can go negative, which means existing customers grow faster than they leave — the state most subscription businesses aim for.
What is involuntary churn, and why do founders miss it?
Voluntary churn is a decision: the customer weighed the product and cancelled. Involuntary churn is an accident: a card expired, a payment bounced, a bank blocked the charge. Paddle, which sells payment recovery, puts involuntary churn at roughly 20–40% of total churn for card-based subscriptions — a vendor figure, so treat it as directional, but the direction is clear. The fixes differ too: voluntary churn is a product and lifecycle problem; involuntary churn is a billing problem, solved with payment retries, card updaters, and dunning e-mails, no product changes required.
Why churn rate matters for a small team
Churn compounds. At 5% monthly churn, a product with no new signups loses roughly half its customer base within a year, so every point of churn raises the acquisition bar just to stand still. A sensible order of operations for a two-person team: fix involuntary churn first, then build retention and win-back flows for the voluntary kind. Use cohort analysis to see when customers actually leave, and lifecycle marketing to reach them before they decide to.