Churn rate

Churn compounds. A monthly rate of 5 per cent looks small, yet after twelve months about 46 per cent of the starting customers are gone. A business can win many new customers every month and still shrink, like a bucket filling faster than it leaks until the leak catches up. Reducing churn often adds more revenue than raising acquisition spend, since every customer kept costs nothing to win again.

• Split churn by signup cohort, not one blended number. A cliff often appears at the moment customers decide whether to stay.
• Separate voluntary churn, where the customer chooses to leave, from involuntary churn, where a card fails. The fixes are different.
• Fix involuntary churn first. Automatic payment retries and reminder emails are often the cheapest recovery available.
• Track logo churn next to revenue churn to see whether losses are many small accounts or a few valuable ones.
• Talk to customers who cancel and look for repeated reasons.
• Set a target on a dashboard the whole team can see.

Take the customers at the start of a month, count how many have left by the end, and divide. If 100 customers start the month and 5 leave, churn is 5 per cent. Counted by number of accounts, this is logo churn. Counted by money, it is revenue churn. The two can tell different stories, because losing many small accounts costs less than losing a few large ones.

• Counting customers who joined during the month in the starting figure.
• Comparing a monthly rate with an annual one.
• Missing churn on annual contracts, which only appears in the renewal month.