How to calculate churn rate

There isn't one churn rate — there are three, and they answer different questions. Customer (logo) churn counts the accounts you lost; revenue churn counts the dollars that left with them; net revenue churn weighs those losses against expansion from the customers who stayed. Ask someone their churn rate and you learn very little until you know which of the three they mean, over what period, on which denominator.

The formulas below share one convention that matters more than it looks: the denominator is always the start-of-period base. Customers or revenue added during the period stay out of both sides of the fraction, so the metric describes the health of the base you already had — not a blend of retention and acquisition.

Count a customer as lost when the subscription actually ends, not when the cancellation is submitted — an account flagged to cancel is still active until the period it stops paying. The denominator stays fixed at the start-of-period count, so growth during the month can't dilute the rate.

Two refinements keep the number honest. Exclude customers who both signed up and churned inside the same period, so onboarding failures don't distort the read on your installed base. And decide upfront whether involuntary churn — expired cards, failed payments — counts in the same bucket as chosen cancellations, because in self-serve businesses it is often a fifth of the total and calls for a completely different fix.

The gross version counts only losses — churned MRR plus contraction — and deliberately ignores expansion; that is what makes it the honest measure of how much recurring revenue leaks out of the base.

Revenue churn exists because customers aren't the same size. Losing one $4,000 account outweighs losing ten $50 accounts, and logo churn can look flat while your largest customers walk out the door. Read the two rates together: the gap between them tells you whether you are shedding small accounts or big ones.

A negative result is the goal: it means the base grew on its own before a single new customer signed — what investors call negative churn.

Net revenue retention is the same fact stated as a survival rate: NRR = 100% − net revenue churn, so −2% net churn reads as 102% NRR. Above 100%, existing customers compound; below it, every new sale is partly refilling a hole. NRR is the version boards and investors quote, which makes net revenue churn the working metric and NRR the headline.

All of them, for different jobs. Customer churn answers how many logos left, and is the right lens on product-market fit at the low end of your base. Revenue churn answers how many dollars left, and is the number your finance model actually consumes. Net revenue churn — or NRR, its mirror — answers whether expansion outruns the leak, and is the one that ends up in the board deck.

Two closing disciplines. Never annualise a monthly rate by multiplying by twelve — churn compounds, and the honest conversion is its own formula. And judge whatever number you get against benchmarks for your deal size and motion, not against a universal average.