WHAT IS: Churn Rate in Business
In crowded markets, churn rate shows whether you’re keeping pace or falling behind.
Whether your business succeeds or thrives largely depends on your customers. When people enjoy your products or services, your revenue grows, you build trust, and you’re more likely to get recommended to others.
But when the opposite happens, you lose customers, revenue, and even future opportunities. That’s why it’s important as a business owner to pay attention to your customer churn rate and understand what it’s telling you about the health of your business.
David Adubiina
What is churn rate, and why is it important?
Customer churn, or churn rate, is the percentage of customers a business loses over a specific period. When this number is high, it usually means a good portion of your customers no longer want to buy from you. That’s often a sign that something in the business isn’t meeting their expectations.
Tracking churn helps you see how many customers are slipping away and gives you clues about why it’s happening. It matters because:
/1. Boost profits
Keeping the customers, you already have is almost always cheaper than constantly trying to acquire new ones. When people stay longer, they tend to spend more over time, which helps your revenue grow instead of just balancing out.
/2. Improve brand identity
How customers see your business plays a big role in whether they stay or leave. If churn is high, it might mean people aren’t connecting with what your brand stands for. Paying attention to this helps you understand where your message or experience may be falling short.
/3. Encourage growth
Your existing customers are the easiest group to introduce new products or services to. But if you’re losing them faster than you’re keeping them, growth becomes harder. A high churn rate is one of the clearest early signs that your retention strategy needs work.
How do you calculate churn rate?
Once you understand why churn matters, the next step is knowing how to measure it. The calculation itself is simple. You can do it in two ways, depending on the numbers you have available.
- Divide the number of customers or subscribers you lost in a period by the number of new subscribers you acquired in that same period, then multiply by 100 to get the percentage.
- Or divide the number of customers lost by the total number of customers you had at the beginning of the period and multiply by 100.
Both methods show you the percentage of customers who stopped using your product or service. The key is to stay consistent with whichever method you choose so you can track changes over time.
Example of the churn rate
To see how churn plays out in real life, look at the Nigerian telecom industry. Back in 2015, 9mobile (now T2) had more than 20 million subscribers. Over the years, a mix of issues surfaced, leading to the customer churn the company is experiencing now, including a major debt crisis in 2017, unstable network quality, strong competition, and the NCC’s nationwide purge of inactive SIM cards. All of this gradually pushed the subscriber base down to about 2.4 million by mid-2025, before the company reintroduced itself as T2.
Numbers like this show why churn rate is so important in industries where customers can switch providers easily. Telecoms, cable TV, and internet services are classic examples. People have multiple options, switching doesn’t cost much, and loyalty is never guaranteed. That’s why churn rates in these industries tend to be high and why companies watch them closely to see how they compare to competitors.
Here’s a simple way to break it down.
Say an internet provider gained 1000 new subscribers in a quarter but lost 120 in that same period. The churn rate would be:
0.12 × 100 = 12%
What does comparing churn rate and growth rate mean for your business?
While churn rate shows how many customers you’re losing, your growth rate shows how many new customers you’re gaining. Looking at both side by side gives you a clearer picture of whether your business is actually growing or slowly shrinking.
If your growth rate is higher than your churn rate, your customer base is expanding. But if churn is higher, it means you’re losing more people than you’re bringing in, which signals a decline even if new customers are coming in every month.
For example, if a company adds 100 new subscribers in a quarter but loses 110, the net result is a loss of 10. That’s negative growth and a sign that something in the experience, pricing, or product might need attention.
Pros and cons of monitoring churn rate
Conclusion
Churn rate might look like just another business metric, but it says a lot about how customers feel about your product or service. When you track it consistently, you get a clearer view of what’s working, what needs attention, and how stable your customer base really is. And whether you’re running a small business or managing a large operation, understanding why people leave and how often it happens makes it easier to build stronger retention strategies and create long-term growth.
David Adubiina
