Churn rate is the share of customers who stop paying during a period, usually one month. You divide the customers lost in the period by the customers you had at the start, then multiply by 100. Churn is the opposite of retention: 5 percent churn means 95 percent retention over that month.
An example. You start March with 1,200 customers, win 150 new ones, and lose 60. Churn is 60 divided by 1,200, so 5 percent. Do not put the 150 new customers into the denominator, because that flatters the number.
Churn sets the average lifetime of a customer, which is 1 divided by the churn rate. At 5 percent monthly churn the average customer stays 20 months. At 10 percent it is 10 months. With an ARPU of €27, that is €540 of lifetime revenue instead of €270. Halving churn often does more for revenue than doubling your ad budget, and it usually costs less. A generated business plan for a subscription model uses your churn assumption to project customer numbers, so a wrong figure here distorts every later year.
Churn also caps your growth. With 1,200 customers and 5 percent churn you lose 60 per month, so you must win 60 new customers to stand still. At 3,000 customers you must win 150.
Two mistakes. First, founders mix customer churn and revenue churn. Losing 5 percent of customers on your cheapest plan hurts less than losing 2 percent on your largest contracts. Report both. Second, they measure too early. With 40 customers, three cancellations look like 7.5 percent, which is noise, not a trend.
