Churn

Imagine you have a bucket full of water (your customers). You're pouring new water in (new signups). But there's a hole in the bottom (cancellations). The water leaking out? That's churn.

Churn is the percentage of customers who cancel or stop paying each month. If you have 100 customers and 5 cancel this month, your monthly churn rate is 5%. Sounds small, right? But 5% monthly means you'll lose about half your customers in a year. It's a killer.

Every subscription business is fighting churn. Netflix adds great content to keep you watching. Spotify creates personalized playlists to keep you listening. Your gym makes it deliberately annoying to cancel (we've all been there). The whole game is: acquire customers faster than you lose them.

Because churn determines whether a subscription business grows or dies. If you're thinking about building anything with recurring revenue, reducing churn is just as important as getting new customers. It's way cheaper to keep a customer than to find a new one — most people learn this the hard way.

Churn rate = customers lost / total customers at period start. Revenue churn (lost MRR) matters more than logo churn (lost accounts). Net negative churn — where expansion revenue from existing customers exceeds revenue lost to cancellations — is the gold standard. Cohort analysis tracks churn by signup date. Reducing churn typically involves improving onboarding, customer success, and product stickiness.