What is Churn?
Churn refers to the loss of consumers, customers or subscribers from an organization. This data is mainly used by companies selling subscription-based products or services. It is an essential business metric for SaaS companies.
Most often expressed as a percentage of service subscribers terminating their subscription within a specified period. For a company to expand its customer base, its growth rate must exceed its churn.
How do you calculate Churn?
Enter the total number of subscribers or customers lost over the period.
Enter the Total number of subscribers or customers at the start of the period.
What is the churn formula?
The churn formula is simple:
Total subscribers lost over the period / Total subscribers at start of period X 100
If this calculation is as daunting for you as it is for me, you can use the formula on the page that automatically calculates churn.
Example of churn, example of churn calculation
Let’s take the example of a company selling software on a monthly subscription basis.
It has 15 users who pay a monthly subscription.
During the month, 3 of the 15 users decided to cancel their subscriptions.
Churn = 3 / 15 * 100 = 20% of sales
20% of subscribers have not renewed, so churn is 20%.
How can you reduce churn?
The most important thing is to track churn and to know the impact of what you put in place on the retention rate.
Sales representatives need to sell the true value of a product or service so that buyers don’t feel cheated. In addition, customer service staff must be able to deal with any problems that arise to ensure customer satisfaction. Investment in the processes and resources of these two departments can have a significant impact on churn.
What is a good churn?
Ideally, zero churn would be the best indicator of churn, as it indicates that the company is not losing subscribers. But this is by no means a reality. Companies always lose subscribers for one reason or another.
In this case, it’s important to compare a company’s churn rate with the industry average, considering whether it’s a new or mature business. Knowing your industry’s data and comparing it with your own is the only way to understand whether your rates are acceptable or too low. Every industry has its own business model, so churn is different.