Churn rate
Churn rate is the share of clients who stopped buying or cancelled during a given period, out of all clients at the start of that period.
How it is calculated
The basic formula is simple: clients lost during the period divided by clients at the start of the period. If a company had 400 active clients at the start of the month and 20 of them stopped buying, monthly churn is 20 / 400 = 5%. The numbers are only an example.
What counts as “lost” depends on the business. For a subscription, it is a cancellation. For repeat purchases, it is usually a client who has not bought for longer than their normal interval.
Why it matters
Churn quietly eats growth. A team can bring in many new clients and still stand still if almost as many leave. Small differences add up: a few points of monthly churn decide whether the base doubles over a year or barely moves.
Churn also shows problems that sales numbers hide: weak service, broken promises, slow answers, a product that does not deliver what was sold.
Typical mistake
Looking only at the total. Churn usually concentrates in specific places: one product, one rep, one source of leads, the first months after purchase. The average hides all of that.
Another mistake is noticing churn too late. When a client is already gone, it is hard to bring them back. The signals appear earlier: fewer orders, longer pauses, unanswered messages, complaints.
What to do
Define what churn means for your business and measure it the same way every month. Split it by segment, rep and client age. Ask leaving clients for a short reason, and look for early warning signs in conversations before the client goes silent.
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