Last updated 28 August 2026
Churn sets the ceiling, not the slope
Multiplying monthly recurring revenue by twelve gives the annual figure, and that part is arithmetic. The interesting question is what the number looks like in a year, and there churn does more work than acquisition does. A steady stream of new customers against a steady churn rate does not grow forever — it converges. The equilibrium is simply new customers divided by the churn rate, which means halving churn does more for the long-run ceiling than doubling signups. Monthly churn also compounds into something larger than it appears annually: four percent a month is not forty-eight percent a year, it is closer to forty, because each month churns what is left rather than the original base. Average customer lifetime is the reciprocal of churn, which is why small improvements to retention stretch lifetime value so sharply.
Common questions
How is annual churn worked out from monthly churn?
It compounds rather than multiplying. Each month churns a share of whoever is still there, so 4% monthly works out to roughly 39% annually, not 48%. The calculator applies the compounding rather than the simple multiple.
What is average customer lifetime?
One divided by the monthly churn rate, in months. At 4% churn the average customer stays about 25 months. It is an average across the base, not a prediction about any individual customer.
Why do customer numbers level off?
Because churn is a percentage of a growing base while signups are a flat number. Growth slows as the base grows, and settles where the two cancel out — new customers divided by churn rate. Lowering churn raises that ceiling far more than adding signups does.
Does this account for upgrades or expansion revenue?
No. It works from a single average revenue per customer, so expansion revenue and downgrades are not modelled separately. Raising the average revenue figure is the simplest way to approximate net expansion.