Churn (Customer churn rate)
Churn is the share of your paying customers who cancel in a period, usually counted per month: customers lost divided by customers at the start.
Worked example (made-up numbers)
You start October with 40 paying customers. During October, 2 cancel and 6 new ones start. Monthly customer churn is 2 ÷ 40 = 5%. The 6 new customers don’t change it: churn looks at the people you had.
Over three months, if 6 of 40 left, monthly churn isn’t simply 6 ÷ 40 ÷ 3. The share still staying after three months is 34 ÷ 40 = 0.85; the monthly rate that gives that is about 5.3%.
Why it matters when you’re starting out
Churn decides how long customers stay, and so what they are worth (LTV). A product that wins 10 customers a month and loses 8 feels busy and doesn’t grow.
With few customers, churn is jumpy: say you have twenty, and one cancellation is already 5%. Look at it over a few months before you react, and look at who left, not only how many.
How to find out why people leave
- Ask at the moment they cancel. One question (“What made you cancel?”) with a free-text answer gets more truth than a survey later.
- Read what they asked for before they left. Feedback from people who later cancelled is a list of what the product didn’t do for them.
- Check where they came from. Customers from one channel may leave much faster than others; that channel’s customers are costing you more than their CAC suggests.
How to measure it
- Count paying customers at the start of the period.
- Count how many of those cancelled by the end.
- Divide, and convert to a monthly rate if the period is longer than a month.
In Nordva Launch
Launch works out monthly customer churn from your Stripe account over up to 90 days (limited by your plan’s history) and shows it with churned MRR. Each person’s record keeps their feedback and where they came from, so you can see what the people who left asked for.