Do you want to calculate your Churn Rate but don’t know how? Use the SaaS churn calculator below and find out whether your business is growing or not. Make projections and see where you could be 1 month or 1 year from now.
| CURRENT SITUATION | Projection with Custify | |
|---|---|---|
| Customers |
|
${ subscribers } |
| New Customers |
| ${ newSubscribers } |
| Monthly Churn Rate |
%
|
${ monthlyChurnRateProjection } |
| Monthly Customer Loss | ${ subscribersLeft } | ${ subscribersLeftProjection } |
| Annual Churn Rate | ${ annualChurnRate }% | ${ annualChurnRateProjection }% |
2021 Update: we have an extensive guide to measuring and reducing customer churn. The following sections show you a little of what you can expect from our guide!
What is a Churn Rate?
Simply put, the Churn Rate is the percentage of customers who leave you over a given period.
However, after working with hundreds of SaaS businesses, we determined the concept of churn and retention is more complex, as there are many aspects you can consider when calculating your Churn Rate. For example, what if a customer doesn’t leave you, but downgrades their subscription?
Because churn is a direct reflection of the value of the product and features you're offering, your Churn Rate has a direct impact on other SaaS business metrics as well. Specifically, it impacts Monthly Recurring Revenue (MRR), Customer Lifetime Value (LTV), Customer Acquisition Cost (CAC), and, ultimately, your Retention Rate.
What is a good Churn Rate for a SaaS business?
There is no universal “average” Churn Rate. Churn can differ from business to business, and from industry to industry. Because of this, SaaS businesses have Churn Rates anywhere from 1% to 17%, most of them falling in the 5-10% category.
So, instead of comparing your Churn Rate to other businesses’, it’s best to analyze how your own Retention Rate has changed over time and do everything you can to constantly improve it.
How to calculate your Churn Rate
Although, in theory, calculating your Churn Rate seems easy, that’s actually not the case. A simple Churn Rate formula is:
But determining the number of customers you had over a given period is tricky - you have customers who have been with you the previous month also, as well as new sign-ups.
Because of this, there’s no one-size-fits-all answer to how to calculate churn. But here are 4 ways you can do a Churn Rate calculation:
1. Dividing churn by the number of customers you had on the first day of the given period
2. Dividing churn by the average number of customers you had during the given period
3. Predicting how much churn you’ll have on each day of the given period
4. Dividing churn by the average number of customers you had during each day of the given period (the Shopify way)
How to reduce churn
Churn has many attributes. Voluntary churn means customers voluntarily choose to leave you, while involuntary churn is caused by factors customers might not even be aware of (like their credit card expiring).
If you can’t convince your customers to keep their current subscriptions, the next best thing you can do is to persuade them to downgrade it instead of canceling it. This is known as revenue churn, and it has a direct impact on your MRR, even if you manage to keep most of your current customer base.
Depending on why your customers want to leave, there are a few strategies you can use:
- For voluntary churn:
- Simplify onboarding
- Improve product quality
- Add new features
- Improve customer support
-
For involuntary churn:
- Implement a dunning strategy
- Use an account updater
Tools that improve Customer Retention
Customer success software like Custify helps you implement and measure customer feedback step by step. We help you keep an eye on:
- Decreasing customer engagement / product usage
- Account management changes
- Account / Customer Retention Rate
- Changing product adoption trends over time
- Relationship Depth / Quality
- Business Health / Industry Health
By tracking these KPIs, you can identify the issues your customers are confronting with and address them to prevent churn from happening. At the same time, you get to learn from your churned customers so you can improve your service and customer experience and prevent more churn happening in the future.
Other handy tools that can help you improve Customer Retention are Chargebee for subscription management and ProfitWell Retain for managing delinquent churn and credit card failure.
