Churn Rate

Churn rate measures how many customers you’re losing over a specific period. If you start the month with 200 customers and lose 10, your monthly churn rate is 5%. While most businesses focus heavily on acquiring new customers, reducing churn is often the more impactful growth lever. Every customer you retain is one you don’t need to spend money replacing — and since acquiring a new customer typically costs five to seven times more than keeping an existing one, reducing churn directly improves profitability.

For subscription-based businesses, churn rate is a make-or-break metric. A monthly churn rate of 5% means you’re losing nearly half your customer base every year and need to replace them just to stay flat. Reducing that to 3% dramatically changes your growth trajectory. But churn matters for all businesses, not just subscriptions. A landscaping company that loses 30% of its clients annually needs to sign 30 new clients just to maintain revenue before it can grow.

Understanding why customers leave is the first step to reducing churn. Common causes include poor customer service, lack of engagement or communication, unmet expectations, pricing issues, and competitors offering better alternatives. Conduct exit surveys or follow-up calls with departing customers to identify patterns. Often, the reasons are fixable — customers who feel ignored or undervalued are more likely to leave than customers who feel appreciated.

Proactive retention strategies can significantly reduce churn. Regular check-ins with customers, loyalty programs, exclusive offers for existing clients, personalized communication, and consistently exceeding expectations all help. Pay special attention to the first 90 days of a customer relationship — this is when churn risk is highest. A strong onboarding experience that demonstrates value quickly sets the tone for a long-term relationship.