What's my monthly churn rate?
Churn rate is the single most important retention metric. It tells you what percentage of your customers you're losing each month. Here's the formula, how to calculate it, and what a good number looks like.
The short answer
Monthly churn rate = (Customers lost this month / Customers at the start of the month) x 100. If you started March with 150 customers and 6 didn't come back, your churn rate is 4%. That means at the current pace, you'd lose about half your customer base in a year.
Why churn rate matters more than new customer count
You can add 10 new customers every month and still be shrinking. If you're losing 12, your base is eroding. Churn rate turns customer losses into a percentage that you can track, compare, and act on.
Here's why the math is brutal: a 5% monthly churn rate means you lose about 46% of your customers in a year (not 60%, because the base shrinks each month). At 3%, you lose about 31%. At 1%, you lose about 11%. Small changes in churn rate have massive compounding effects.
Most businesses focus on acquisition because it feels like progress. But plugging a churn leak is almost always more profitable than pouring more customers into a leaky bucket.
The churn rate formula and what counts as churned
The formula itself is simple:
The “+ New customers added” part is important. If you started with 100, ended with 102, and added 8 new customers, you actually lost 6. Your churn rate is 6%, not 0%.
For non-subscription businesses, “churned” usually means a customer who was active in the previous period but had no transactions in the current period. You need to define your own window based on your typical buying cycle.
How to calculate churn rate using QuickBooks Online
- 1Go to Reports → Sales by Customer Summary
Set the date range to last month. Count the number of unique customers with transactions. This is your starting count.
- 2Run the same report for this month
Change to the current month. Count unique customers again.
- 3Export both and compare in a spreadsheet
Export both reports to CSV. Use VLOOKUP to find customers in last month's list who are missing from this month's list. Count them. These are your churned customers.
- 4Identify new customers
Flip the VLOOKUP: find customers in this month's list who are not in last month's list. These are new additions.
- 5Calculate the rate
Divide churned customers by last month's customer count. Multiply by 100. Example: 6 churned / 150 starting = 4% monthly churn rate.
Total time: 25-35 minutes. Two report exports, spreadsheet comparison, identification of new vs. churned, and a calculation.
How to calculate churn rate using Xero
- 1Go to Business → Invoices for each month
Filter invoices by last month and this month separately. Export both lists. Extract unique customer names from each.
- 2Compare the two customer lists in a spreadsheet
Identify who was in last month's list but missing from this month's (churned), and who is in this month's but not last month's (new).
- 3Apply the formula
Churned count / last month's customer count x 100 = your monthly churn rate.
Total time: 20-30 minutes. The process is nearly identical to QuickBooks, starting from the invoice list instead of Sales by Customer.
What it takes to track churn rate consistently
- 25-35 minutes every month. The same spreadsheet exercise, repeated. Most owners do it once, maybe twice, then stop.
- The definition can shift.If you change your window for what counts as “active,” your churn rate changes retroactively. Consistency in methodology matters more than the exact number.
- A rate without context is just a number. Knowing your churn is 4% is useful. Knowing that 3 of the 6 churned customers were high-value accounts worth $12K/year each is actionable. The rate alone does not tell you the impact.
Or get your churn rate calculated automatically
Bottomline calculates your monthly churn rate from your transaction data, applies the same definition every month, and shows you the trend over time so you can see whether retention is improving or deteriorating.
The trend line is what matters. A single month's churn rate is a data point. Six months of churn rates, consistently calculated, tell you whether your retention efforts are working or whether you're slowly losing your base.