Churn compounds too

3% a month isn’t 36% a year.

Churn is compounding in reverse. Small monthly numbers turn into big annual losses, and you can’t judge a retention problem without feeling that.

The move

Each month you keep (100 − churn)% of what’s left. Multiply that survival rate month after month. For a quick estimate, the rule of 72 tells you how long until half are gone.

Worked example

1,000 customers, 5% monthly churn. Left after 2 months?

  1. Keep 95% each month
  2. 1,000 × 0.95 = 950
  3. 950 × 0.95 = 902.5 ≈ 903
  • Annual churn from monthly: 1 − (1 − c)¹². 3% monthly ≈ 31% annually, not 36%.
  • It’s less than × 12 because you can only lose customers you still have.