# Churn rate

Churn rate is the percentage of customers, or of recurring revenue, that a business loses over a given period, such as a month or a year. It is the flip side of retention and one of the main measures of whether a subscription business is keeping what it wins.

## How do you calculate churn rate?

To calculate churn rate, divide the customers you lost during a period by the customers you had at the start of it, then multiply by 100.

`Customer churn rate = customers lost during the period ÷ customers at the start of the period × 100`

**Example.** You start the quarter with 500 customers and 25 cancel by the end of it. Churn rate is 25 ÷ 500 × 100 = 5% for the quarter. Customers who signed up during the quarter stay out of both numbers; counting them makes churn look lower than it is.

**Monthly vs annual churn.** Don't multiply a monthly rate by twelve. Losses compound, because each month you lose a share of a smaller base. If you lose 2% of customers each month, you keep 98% each month, and after twelve months about 78% of the original customers remain (0.98 to the twelfth power). Annual churn is about 22%, not 24%.

## What is the difference between logo churn and revenue churn?

Logo churn (also called customer churn) counts accounts. Revenue churn counts money, and it includes downgrades as well as cancellations.

`Revenue churn rate = (recurring revenue lost to cancellations + downgrades) ÷ recurring revenue at the start × 100`

**Example.** The same quarter starts at $200,000 in monthly recurring revenue. Cancellations take away $6,000 and downgrades another $4,000. Revenue churn is $10,000 ÷ $200,000 × 100 = 5%.

The two can tell different stories. If the 25 customers who left were all small accounts, customer churn looks high while revenue churn stays low. If one large account downgraded, the reverse happens. Track both, and segment by plan or company size so one doesn't hide the other.

Some teams also report net revenue churn, which subtracts expansion from existing customers. That is the mirror image of net revenue retention, and it can go below zero when upgrades outweigh losses.

## What is a good churn rate?

It depends on who you sell to and how. Churn tends to be higher for:

- **Small businesses and individuals,** who close, switch tools and cut costs more often than large companies.
- **Monthly plans,** where leaving is one click, against annual contracts that only come up for renewal once a year.
- **Low-priced products,** where little time goes into choosing and rolling them out.

Look for a published benchmark that matches your segment, price point and contract type before comparing yourself with it. The more useful comparison is internal: churn by sign-up cohort, by plan and by segment, tracked over time. If each new cohort churns less than the last, you're improving.

## How do you reduce churn rate?

- **Fix involuntary churn first.** Payment retries and card-expiry reminders recover customers who never meant to leave.
- **Get new customers to a result early.** An account that stalls in setup has little reason to renew.
- **Widen use inside each account.** More teams and workflows mean the product is harder to drop.
- **Act on leading signals.** Falling usage of the core action, a quiet admin and unresolved requests show up before a cancellation does.

The first weeks shape the renewal: new users who never reach a real result have little reason to stay. An in-product agent helps in those weeks, because a new user can ask for the result and the agent does the step with them. Foldspace's Product Agent does that in the product, and the included product analytics (retention, funnels and session replay) can [compare retention across segments](https://docs.foldspace.ai/user-guides/analytics/retention/), such as the users who worked with the agent.

## Learn more

- [Product Analytics](/platform/product-analytics)