Churn

Churn refers to the percentage of customers or subscribers who stop doing business with a company over a given period. It’s a vital metric for subscription-based businesses, SaaS platforms, and membership models, as it directly impacts growth, customer lifetime value (CLTV), and profitability.

Types:

  • Customer Churn: The number of customers lost.

  • Revenue Churn: The value of recurring revenue lost from existing customers due to cancellations or downgrades.

Formula:

Customer Churn Rate (%) = (Customers Lost During Period / Total Customers at Start of Period) × 100

Revenue Churn Rate (%) = (Recurring Revenue Lost During Period / Recurring Revenue at Start of Period) × 100

Importance:

  • Identifies customer dissatisfaction trends.

  • Helps forecast future growth and revenue stability.

  • Directly influences net retention rates and valuation for recurring revenue businesses.

Example:

If a SaaS company in Dubai starts January with 500 subscribers and loses 50 by month-end, the churn rate is 10%.