Churn
Churn refers to the percentage of customers or subscribers who stop doing business with a company over a given period. It’s a vital metric for subscription-based businesses, SaaS platforms, and membership models, as it directly impacts growth, customer lifetime value (CLTV), and profitability.
Types:
Customer Churn: The number of customers lost.
Revenue Churn: The value of recurring revenue lost from existing customers due to cancellations or downgrades.
Formula:
Customer Churn Rate (%) = (Customers Lost During Period / Total Customers at Start of Period) × 100
Revenue Churn Rate (%) = (Recurring Revenue Lost During Period / Recurring Revenue at Start of Period) × 100
Importance:
Identifies customer dissatisfaction trends.
Helps forecast future growth and revenue stability.
Directly influences net retention rates and valuation for recurring revenue businesses.
Example:
If a SaaS company in Dubai starts January with 500 subscribers and loses 50 by month-end, the churn rate is 10%.