Churn in plain English
Churn is the leak in a recurring revenue business. Every month some members leave, and every one of them has to be replaced before the program grows at all.
Example: a 9-tech HVAC company has 1,150 members on monthly billing and signs up about 30 new members a month. If it loses 21 a month, it grows by 9. If churn creeps up to 30 a month, the company is selling flat out and going nowhere.
How do you calculate churn rate?
Formula
With the example above: 21 ÷ 1,150 × 100 = 1.83% monthly churn.
Some billing systems put new members in the denominator too. Stripe's subscriber churn rate, for example, divides churned subscribers in the past 30 days by active subscribers 30 days ago plus new subscribers in that window.1 With 38 new members that month, the same shop would show 21 ÷ 1,188 = 1.77%. Neither is wrong; pick one definition and never switch mid-year.
Converting monthly churn to annual churn
Multiplying by 12 overstates it, because each month's losses come from a smaller remaining base. Use compounding instead:
Annual churn from monthly
| Monthly churn | Annual equivalent | Members left of 1,000 after a year (no new sales) |
|---|---|---|
| 1% | 11.4% | 886 |
| 2% | 21.5% | 785 |
| 3% | 30.6% | 694 |
| 5% | 46.0% | 540 |
The example shop's 1.83% a month works out to about 19.8% a year.
Customer churn vs revenue churn
Customer churn counts members. Revenue churn counts dollars of recurring monthly revenue lost, including downgrades to cheaper tiers. Stripe defines churned revenue as churned MRR plus contraction MRR.1 Losing ten $9 plans and losing ten $35 plans is the same customer churn and very different revenue churn, so track both.
Voluntary vs involuntary churn
| Voluntary churn | Involuntary churn | |
|---|---|---|
| What happens | The member chooses to cancel or not renew | A payment fails and is never recovered |
| Typical causes | No perceived value, missed visits, price, moving away | Expired card, reissued card number, insufficient funds |
| Does the member know? | Yes | Often not |
| How fixable | Partly: through service and value | Very: through retries, reminders and card updates |
| Where to measure | Cancellation reasons | Failed-payment lapses |
General subscription data shows how much of churn is involuntary. In Recurly's July 2026 benchmarks, involuntary churn was 1.25 points of 3.60 points of total churn, about a third (vendor data).2 Stripe reports that 25% of lapsed subscriptions on its platform lapse purely because of payment failures (vendor data).3 Neither dataset is specific to contractors, but both suggest a meaningful share of member losses are people who never decided to leave.
What causes churn, and what lowers it?
| Cause | Lever | How to check it |
|---|---|---|
| Failed cards | Automatic retries over two weeks, text with an update-card link | Lapses with a failed-payment reason, month over month |
| Included visits never happened | Book visits due in bulk before the season | Visits completed ÷ visits due, for lost members |
| Member didn't see the value | Show savings on every invoice and a yearly summary | Churn for members with and without a repair in the term |
| Price increase surprised them | Give notice before renewal, explain what changed | Cancellations in the month after a price change |
| Moved or sold the home | Offer to transfer the plan to the new owner | Share of losses with a moving reason |
| Wrong plan for the home | Offer a tier change before cancellation | Downgrades vs cancellations |
Churn report hygiene
- Record a reason on every cancellation
- Separate failed-payment lapses from decisions
- Report customer churn and revenue churn
- Use the same denominator every month
- Exclude test or duplicate accounts
- Review by plan, by sign-up month and by selling tech
The math of what one point of churn is worth over a member's lifetime is worked through in membership math: lifetime value and churn.
Free calculatorMembership program revenue calculatorSee what a maintenance membership program is worth over three years.How do you calculate churn for annual plans?
Annual members can only leave in two ways: cancel mid-term or fail to renew. Count both as losses in the month they happen, divide by members at the start of the month, and the monthly churn formula still works.
The catch is timing. Annual losses bunch up in the months when large groups of plans come due, often the months after a busy spring or fall selling season. A program can show 0.5% churn in a quiet month and 4% in a heavy renewal month without anything changing.
| Plan type | Losses come from | Best primary metric | Also report |
|---|---|---|---|
| Monthly, no end date | Any month: cancellations, failed cards | Monthly churn | Revenue churn |
| Annual, auto-renew | Renewal month, plus some mid-term cancels | Renewal rate | Monthly churn for the roll-up |
| Annual, manual renewal | Mostly the renewal month | Renewal rate | Days from due date to renewal |
For a single program-wide number, use a trailing 12-month total: members lost over the last 12 months ÷ average members over the same period.
Churn vs renewal rate
Annual plans reach a decision point once a year, so most shops judge them by renewal rate. Monthly plans can be canceled any month, so churn fits them better. If you sell both, report renewal rate for annual plans and monthly churn for monthly plans, and roll both into one count of members lost per month for the owner's scorecard.
Churn in TradesWork
TradesWork charges monthly dues on schedule and annual plans at renewal. A failed card is retried 1, 3, 7 and 14 days after the first failure, with a text and an update-card link each time, and memberships that never clear land in Needs attention. Canceling a membership takes a written reason, which gives you a voluntary churn breakdown. See memberships.
Footnotes
-
Stripe Docs, Billing analytics: metric definitions, subscriber churn rate and churned revenue. ↩ ↩2
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Recurly Research, Churn rate benchmarks, July 2026. Vendor data from Recurly's subscription network. ↩
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Stripe, How we built it: Smart Retries, January 23, 2024. Vendor data. ↩
