Churn
The share of customers who stop buying or paying during a period, out of those you had at its start.
In plain words
Churn shows how many customers leave. Take the customers you had at the start of a period. Count how many stopped buying by its end, and divide. Customers won during the period stay out, or a good sales month hides losses.
First decide what "lost" means for your business. With subscriptions it is a cancelled contract or a missed renewal. With repeat orders it is no order within the usual buying interval. Write the rule down, mark lost customers in the CRM with a status and a reason, and count from that.
Formula
Churn = Customers lost in the period ÷ Customers at the start of the period × 100%
New customers won during the period stay out of both parts.
Worked example (invented numbers)
40 customers at the start of the quarter, 4 of them lost: churn of 4 ÷ 40 × 100% = 10%.
How to use it
Look at churn once a month, with the list of lost customers next to the number. The account manager and the head of sales go through each name: why they left, and whether anyone saw it coming. The owner gets the monthly number and the main reasons.
Churn changes where you spend effort. If customers leave in the first months after payment, check the handover and what was promised in the sale. If they leave at renewal, check the contact rhythm after the sale. More new sales do not fix a leaking base.
Churn cuts LTV directly: the shorter customers stay, the less each one is worth. Upsell works the other way, so read the two together. Churn also shapes how much CAC you can afford, since a customer who leaves early never pays it back.
Common mistakes
- Counting new customers in the denominator. Churn then looks lower in a strong sales month. Fix the base at the start of the period and leave new customers out.
- Counting a customer as lost only when they say so. Many leave in silence and simply stop ordering. Set a rule by buying interval and mark them lost when it passes.
- Looking at the rate without the names. Example (invented numbers): 2 lost customers out of 50 looks small, but if both were the largest, revenue fell sharply. Read the list and the lost revenue beside the rate.
- Recording no reason. Without a reason you cannot tell a price problem from a delivery problem. Add a required lost reason with a short list of options.
NEXT STEP · TOOL
By Friday, the head of sales writes the rule for when a customer counts as lost and shares it. Then list the customers lost last quarter by that rule, with revenue and the reason. Pick the three largest losses and ask their owners to call each customer and ask why they left.
Which numbers to check every week, with one definition for the whole team.