Churn rate FAQs
Churn is a tricky subject, but we get many of the same questions on churn rate again and again. Here are some of the most asked questions, and our answers for them.
Why is churn so important?
Churn is a super important metric for businesses, because it can point you to what’s going right, what’s not-so-right, and what’s very wrong with your business model and its processes.
A low churn rate in a subscription business means customers are happy with the value you’re delivering. A high churn rate, on the other hand, could mean that you’re failing to fulfil the promises you made to your customers.
The faster a customer churns, the less amount of revenue you will have earned from them. If a customer churns quickly, you may find that you spent more on acquiring them in the first place than they ended up spending with you. Not ideal.
What is a good churn rate?
According to our churn rate studies, average churn rates are everywhere from 2% - 8% of MRR. Therefore, a churn rate at the low end (2%) would be considered “good”. By company age, 10+-year-old companies have a 2-4% churn, whereas younger companies range from 4% - 24%.
What is a negative churn rate?
A negative churn rate occurs when added revenue from new customers (expansion revenue) surpasses lost revenue from churned customers. A negative churn rate is usually caused by activities such as = upgrades, service options, add-ons, etc.
Does churn rate affect retention?
Yes, the churn rate is the inverse of retention. When customers are not retained, they churn by default. Understand your customers better using this cohort analysis excel template.
How can I track churn?
Services like ProfitWell Metrics and ProfitWell Retain help you track churn and deploy means to manage and reduce churn thru integration.