churn rate · customer attrition
Churn (or attrition rate) measures the proportion of customers lost over a period: customers lost divided by customers at the start. It is the silent enemy of LTV: the higher the churn, the less each customer brings, and the harder your acquisition has to compensate.
The formula
Churn = Customers lost over the period ÷ Customers at the start
A concrete example
Example
You start the quarter with 200 active customers and lose 14: your quarterly churn is 14 ÷ 200 = 7%.
Why it matters
High churn turns acquisition into a leaky bucket: you pay to replace customers you could have kept. Cutting churn by one point often improves profitability more than raising the ad budget by 20%, because the effect compounds over the whole customer lifetime.
Frequently asked questions
- What is a good churn rate?
- It depends on the model: a B2B software subscription aims for under 1 to 2% per month; a project-based services business reasons in repeat-customer rate instead. The right benchmark is your trend: rising churn is always a warning signal.
- How do I reduce it?
- By treating the causes, not the symptom: measure why customers leave (price, perceived quality, lack of follow-up), fix the main cause, and set up proactive monitoring of at-risk customers before they go.