A guide to calculating the churn rate for your business

Read our guide to what your business's churn rate is, and how to calculate it.

As a (small) business owner, it is crucial to understand your company's annual churn rate. This provides you with good insight into your business's health and helps you understand your product or service issues. However, many people are unaware of the best way to calculate an annual churn rate. This is why we've compiled this guide to calculating your business's annual churn rate.

Churn rate - explained

Your customer churn rate identifies how many clients are leaving your business within a specified period. On the other hand, revenue churn describes the percentage of revenue your business loses within a specified period. Of course, if your business model is based on a subscription, that means all clients pay the same amount every month, your customer and revenue churn will be the same. Of course, if not all subscribers pay the same amount, your customers' churn and percentage of monthly recurring Revenue lost will differ.

Companies should calculate their respective churn rates as it helps determine when your business is making a loss (eg, identify for how many customers the customer lifetime value outweighs their cost of acquisition). If your monthly churn rate amongst existing customers is high over a more extended period, this is likely to indicate issues with your service or product.

Your customer churn rate identifies how many clients are leaving your business within a specified period.

Calculating your business's annual churn rate

There is no single formula to calculate your churn rate. However, there is a simple method to calculate customer churn rate and revenue churn rate.

The formula for the annual churn rate for customer churn is as follows: Customer churn rate = Number of churned customers within a given period / total number of customers up for renewal during given period.

The formula for the annual revenue churn rate is as follows:

Revenue churn rate = Revenue canceled or lapsed within a given period / total Revenue up for renewal during given period.

Crumpled invoices
There is no single formula to calculate your churn rate.


Company X had 50,000 customers due to renew their software in 2021. During this period, 3,000 clients churned.

To calculate the customer churn rate, apply the formula above:

3,000 / 50,000 = 0.06 x 100 = 6%

The customers churning means a total revenue loss of GPB 25,000 out of their total Revenue of GPB 500,000. This is how you calculate their revenue churn rate:

25000 / 500000 = 0.05 x 100 = 5%

Calculating the customer churn rate
On the other hand, revenue churn describes the percentage of Revenue your business loses within a specified period.

Other ways to identify your company's annual churn rate

While there are several other options to calculate a company's churn rate, however, it is advisable to keep churn calculations as simple as possible and use them as a starting point for a more thorough analysis. Keeping the calculation simple also means it is easier to compare.

Watch the Webinar Recording

Start Your Free Trial

Let informed predictions and powerful reporting guide your business. Be ahead of the curve with Futrli.

Get business advice here

Our blog holds tips, how to’s and general business advice.

Futrli News

Futrli's February 2024 Release

This is some text inside of a div block.


Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat.

Futrli News

Futrli's February 2024 Release


3 Apps to beat accounting blues and scale your firm

Chris Downing catches up with three accounting app innovators to discuss the apps that they have developed that directly help accountants.


Where most prediction software falls short

Tread carefully when looking for prediction software. Find out how to dig deeper into your predictions with the tools that count.

Small Businesses

Cash is King! 4 ways to keep your cash flow healthy.

Cash flow is essential to your business’ survival. Read our top 4 tips for taking control of your cash flow.

Small Businesses

10 Common Cash Flow Forecast Hurdles

If there’s one thing that all small and medium-sized enterprises should prioritise, it’s their cash flow. Read on to find out the top 10 most common issues.


Empowering Accountants: How to Embrace Uncertainty with Futrli

The future is far from certain. Find out how Futrli helps accountants wade their way through murky, grey, “This might happen”-type scenarios.

Small Businesses

Inflation affecting your hospitality business? Take back control with these three steps.

Acting quickly is key to ensure you can ride out the incoming storm. Find out more in this article.

Small Businesses

Why cash flow forecasting helps businesses survive downturns in trade

Learn how cash flow forecasting is crucial for surviving slower trading periods.


The 7 reasons why SMEs struggle with cash flow management

Find out the 7 major reasons why your clients’ businesses struggle to achieve a positive, healthy, consistent cash flow.


Take clients from compliance to scenario planning in five steps

Scenario planning helps your clients imagine different environments or realities in the future, guiding the plans and decisions your clients make.


Flash reports and why to build them

This short guide covers what Flash Reports are and how you could use them as a speedy solution for your clients’ reporting needs.

Small Businesses

Head of Accounting and Futrli COO discuss challenges and solutions for small businesses.

Read Dan and Helen’s thoughts on how SMEs can protect themselves during what is set to be a challenging year.