Use this free tool to calculate your retention rate
Enter the number of customers/persons at the start of the period.
Enter the number of customers/persons retained at the end of the period.
Enter the number of new customers/persons acquired during the period.
What is the retention rate? Definition
The retention rate measures the percentage of customers and people who continue to be customers of the company compared to the percentage of customers who have dropped out.
The customer retention rate is an essential indicator for companies, as it shows whether customers are satisfied with the current service or product.
A high retention rate means that you can have a constant cash flow over the years of your company’s activity.
What is a good retention rate?
The maximum retention rate is 100%. This means that all the customers you had in the first year stayed with you the following year. A good retention rate will vary from industry to industry.
If we take into account your customers’ retirements and changes of profession, we can say that a retention rate equal to or greater than 80% is a good retention rate whatever the industry. The best thing would be to be able to compare with companies of a similar size to yours, working in the same industry.
If the retention rate is over 95%, then it’s very good or even excellent.
It’s simpler and cheaper to keep your existing customers than to have to prospect for new ones.
Retention rate calculation formula
When calculating your retention rate, you assess the number of customers who remain at the end of the period under review, in relation to the number of customers who were present at the start of the period. The number of new customers acquired has no impact on the retention rate, which is why we remove it.
We consider this number only to subtract it from the total number of customers at the end of the period. Then we divide the difference by the number of customers at the beginning of the period. Finally, we multiply by 100 to discover the percentage retention rate.
Retention rate =
[( the number of customers/persons retained at the end of the period – the number of new customers/persons acquired during the period ) / the number of customers/persons at the beginning of the period ] x 100
Or
Retention rate = [(F-N) ÷ D] x 100
F = number of customers/persons retained at the end of the period
N = number of new customers/persons acquired during the period
D = number of customers/persons at start of period
Example of retention rate calculations
Example 1: calculating the retention rate for a delivery company
Let’s say you’re a parcel delivery company.
At the end of year 1, you have 200 customers.
At the end of year 2, you have 400 customers.
In year 2, you gained 300 new customers.
We want to calculate the customer retention rate between the two years. The retention rate is :
[(400-300) ÷ 200] x 100 = 50%
The company kept 50% of the customers it had in the first year.
Example 2: calculating the retention rate for a SaaS company
Let’s say you’re an online movie service.
At the end of September, you have 1,000 customers.
At the end of October, you have 1,500 customers.
In October, you gained 900 new customers.
We want to calculate the customer retention rate between the two years. The retention rate is :
[(1500-900) ÷ 1000] x 100 = 60%
The company retained 60% of the customers it had in the first year.
Example 3: calculating the retention rate for a garage owner
Imagine you’re a garage.
At the end of January, you have 122 customers.
At the end of February, you have 53 customers.
In February, you gained 52 new customers.
We want to calculate the customer retention rate between the two years. The retention rate is :
[(53-52) ÷ 122] x 100 = 0,82%
The company retained 0.82% of the customers it had in the first year.