Churn rate = customers lost in the period ÷ customers at the start of the period
6 ÷ 120 = 5 percent a month
How long does the average customer stay?
About 1 divided by the monthly churn rate, in months. At 5 percent a month, customers stay about 20 months on average. At 2 percent, about 50. That average stay is the "how long" in your lifetime value, so a business that halves its churn roughly doubles what each new customer is worth, without changing its prices.
The sum applies to businesses where customers are on a plan or a contract and leave by cancelling: memberships, subscriptions, regular services. A shop where every order is a fresh choice is better measured by its repeat purchase rate.
Why does a Mackay pool service stop growing at 160 customers? (example figures)
A one-van pool cleaning business in Mackay charges $140 a month for a fortnightly service. On 1 July it has 120 customers, and its Google Ads and letterbox drops win about 8 new ones a month. In July, 6 cancel: churn of 5 percent.
There is a simple ceiling hiding in those numbers. New customers a month divided by monthly churn gives the size at which the business stops growing, because the leavers equal the joiners.
| At 5 percent churn | At 3 percent churn | |
|---|---|---|
| New customers a month | 8 | 8 |
| Customers after 12 months (from 120) | about 138 | about 165 |
| Ceiling (8 ÷ churn) | 160 | 267 |
| Monthly revenue at the ceiling | $22,400 | $37,380 |
| Average customer stay | 20 months | 33 months |
At 5 percent, more ads only raise the ceiling slowly, and each extra customer costs money to win. Cutting churn to 3 percent raises the ceiling by more than 100 customers with the same 8 new ones a month. For this business, keeping customers is worth more than finding them.
Which cancellations can a business prevent?
Sort every cancellation by reason, because they need different fixes. People who sell the house and move away are mostly lost, though asking them to pass your name to the buyer costs nothing. People who leave unhappy (a missed visit, a green pool after a storm) are the ones to win back, and a call within a day of the complaint is the first thing to try, before any discount. Failed card payments are churn too: a reminder text and a card update link keep customers who never meant to leave.
Why is churn a number you bring to Cora?
CoraVision connects to ad and analytics accounts, and churn sits in your booking or billing software, so it comes into the plan through you. How long customers stay feeds straight into your lifetime value. When the one number you choose to chase is customer count or monthly revenue, churn is often the cheaper side of the sum to work on, and the 12-month plan can reflect that.
Questions
Is retention rate the flip side of churn?
Yes. If 5 percent of last month's customers left, 95 percent stayed, and that 95 percent is the retention rate. The two always add up to 100. Talk about whichever one your team finds easier to act on.
Is monthly churn just the annual figure divided by 12?
No, because each month's loss comes out of a smaller group. A steady 5 percent a month loses about 46 percent of a starting group over a year, not 60 percent. Compare monthly with monthly and yearly with yearly.
Should a customer who pauses count as churned?
Track pauses on their own line. A pool owner who stops service for a month while away usually comes back, and counting them as lost makes churn look worse than it is. If a pause runs past a set time, such as three months, move them into the churned count.