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Churn Rate

What is Churn Rate?

Churn rate measures the percentage of customers who stop using a company's product or service during a specific period. It’s calculated by dividing the number of churned customers by the total number of customers at the beginning of the period. A high churn rate can indicate dissatisfaction with the product or service, poor customer support or better alternatives in the market.

Reducing churn rate is critical for maintaining a stable customer base, ensuring long-term business growth, and upholding a healthy Annual Recurring Revenue (ARR). Companies often implement strategies such as improving customer service, enhancing product features and offering loyalty programs to retain customers. Regularly monitoring churn rate helps businesses identify potential issues early and take corrective actions to improve customer retention.

Related terms

Cash Flow from Financing Activities
Cash flow from financing activities (CFF) is a metric that can help investors understand a company’s net cash flows and overall financial strength. This number considers a business’s debts, equities and dividends, and is typically listed as a section in a company’s cash flow statement.
Cash Flow from Investments
Cash flow from investments can be used to understand the money your business has earned from or spent on real estate, stock and other investment opportunities.
Churn Rate
Churn rate is the percentage of customers who discontinue their subscriptions or stop using a company's product or service during a specific period.
Current Accounts Payable
Current accounts payable (CAP) is a metric that works alongside current accounts receivable by providing information on your company’s debts. Accounts payable are current liabilities – your business will eventually need to pay its debts, which will result in cash outflow.
Current Accounts Receivable
Current account(s) receivable (CAR) is a KPI used to track the amount of money B2B customers owe your business.
Current Ratio
Current ratio is a metric that makes it easier for businesses to understand their ability to deal with short-term liabilities.