Churn rate is a business metric that measures the proportion of individuals or items moving out of a group over a specific period. It is one of two primary factors that determine the steady-state level of customers a business will support. Churn rate is widely applied in business for contractual customer bases, such as a subscriber-based service model used by mobile telephone networks and pay TV operators.

Churn rate is an input into customer lifetime value modeling and can be part of a simulator used to measure return on marketing investment using marketing mix modeling. When applied to a customer base, churn rate is the proportion of contractual customers or subscribers who leave a supplier during a given period. It may indicate customer dissatisfaction, cheaper and/or better offers from the competition, more successful sales and/or marketing by the competition, or reasons having to do with the customer life cycle.

To calculate churn rate, choose a specific time period and divide the total number of subscribers lost by the total number of subscribers acquired, and then multiply for the percentage. For example, if a company had 500 customers at the beginning of the month and only 450 customers at the end of the month, its customer churn rate would be 10% .

A good or "acceptable" churn rate is from 2% to 8%, especially for B2C SaaS businesses that offer self-serve solutions. The lower, the better, or it can significantly impact your Monthly Recurring Revenue (MRR). For B2B SaaS businesses with high average contract values (greater than $1,000 per month), churn rate should be below 2% .