The share of customers you lose each period — with retention rate, average customer lifetime, and a correct monthly-to-annual conversion.
Count the customers you had on the first day of the period and how many of those cancelled by the end. New customers acquired during the period don't belong in either number, or the rate gets distorted.
You started the month with 2,000 subscribers and 70 of them cancelled. Churn = 70 ÷ 2,000 × 100 = 3.5% a month, so retention is 96.5% and the average customer stays about 1 ÷ 0.035 ≈ 28.6 months.
Don't multiply monthly churn by 12. Each month you lose a percentage of a smaller base, so 3.5% monthly churn is about 34.8% a year, not 42%. The second mode above does this conversion.
It depends on who you sell to. Consumer subscriptions often see several percent monthly churn; B2B software sold on annual contracts to larger companies typically churns far less. Churn feeds directly into lifetime value and CAC payback, so small improvements compound.
How do you calculate customer churn rate? Divide the customers lost during a period by the customers you had at the start, and multiply by 100. 70 lost from 2,000 is 3.5% churn.
How do you convert monthly churn to annual churn? Annual churn = 1 − (1 − monthly churn)^12. 3.5% monthly churn is about 34.8% annual churn — not 3.5 × 12.
What is the difference between churn and retention? They are complements for the same period: retention rate = 100% − churn rate.
