Guest Column | June 7, 2019

3 Mistakes To Avoid When Tracking Churn

By Nicole Hitner, Exago

Customer Churn

"Well, in our country," said Alice, still panting a little, "you'd generally get to somewhere else — if you run very fast for a long time, as we've been doing."

"A slow sort of country!" said the Queen. "Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!"

— Lewis Carroll, Alice Through the Looking Glass

Though customer retention certainly matters to businesses operating on non-recurring revenue, for software-as-a-service (SaaS) providers and other subscription-based companies, it’s a vital sign. Churn — the proportion of customers who leave your service in a given span of time — reflects how much work your teams will have to do just to maintain their existing recurring revenue.

Churn Rate = Number of Churned Customers/Total Customers

The formula may look simple, but looks can be deceptive. According to Maeve Kneafsey of CloudKPI, who has made it her business to know such things, there are a whopping 43 different ways to calculate churn. The reason this number is so high is due to variation in how companies 1) count customers, 2) define the moment of churn, and 3) include or exclude customers from the time frame in question.