Customer retention rate is the percentage of the customers you started a period with who are still there at the end. The standard formula subtracts customers acquired during the period from the closing count before dividing by the opening count, because otherwise new acquisition would be credited as retention. A company adding customers faster than it loses them can report over 100% retention on the naive calculation while quietly losing a fifth of its base.
Retention and churn are complements: one is a hundred minus the other, over the same period and the same base. They are not interchangeable in every context, though. Retention is the natural framing for cohort analysis and for customer success work, while churn is the framing that feeds lifetime value, because expected lifetime is the reciprocal of churn rather than of retention.
Annual retention compounds, which surprises people the first time they compute it. A 95.50% monthly rate leaves 57.5% of a cohort after twelve months, because the rate applies again each month to whoever remains. This is also why small improvements matter so much: moving monthly retention from 95% to 97% takes annual survival from 54.0% to 69.4%.
The formula
Start- Customers at the beginning of the period
End- Customers at the end, including any newly acquired
New- Customers acquired during the period, removed before dividing
Annual retention- Monthly retention raised to the twelfth power
How to use this calculator
- Enter the customer count at the start of the period.
- Enter the count at the end of the same period.
- Enter how many of those were newly acquired during it.
- The gauge shows retention with new customers excluded; churn and annual survival follow.
Worked examples
From 2,400 to 2,482 with 190 new customers
Of the closing 2,482, only 2,292 were there at the start, so retention is 95.50% and churn 4.50%. The naive calculation of 2482/2400 would report 103.42% and suggest the base was growing through loyalty rather than through acquisition.
What retention compounds to
At 95.50% a month, 57.5% of a cohort is still present after a year. Lifting retention two points to 97.50% raises that to 73.8%, and on $42 of ARPU it protects about $2,016 of monthly revenue.
How to read your score
Frequently asked questions
Why subtract new customers from the closing count?
Because retention asks how many of the original customers stayed. Leaving acquisitions in the numerator credits marketing for retention work and can push the figure above 100%, which is meaningless for a customer count.
Is retention just the opposite of churn?
For customer counts over the same period, yes — they sum to 100%. They diverge in revenue terms, where expansion from existing customers can push net revenue retention above 100% while customer retention stays below it.
How do I annualise a monthly retention rate?
Raise it to the twelfth power. 95% monthly gives 0.95 to the twelfth, about 54% a year. It compounds downwards, so monthly figures always look far more comfortable than annual ones.
What does cohort retention add?
It tracks each intake separately over time, which reveals whether retention is genuinely improving or whether a changing mix of customers is masking a decline in the aggregate figure.
Retention reference
| Monthly retention | Monthly churn | After 3 months | After 6 months | After 12 months | Average lifetime |
|---|---|---|---|---|---|
| 80.0% | 20.0% | 51.2% | 26.2% | 6.9% | 5.0 months |
| 88.0% | 12.0% | 68.1% | 46.4% | 21.6% | 8.3 months |
| 92.0% | 8.0% | 77.9% | 60.6% | 36.8% | 12.5 months |
| 95.0% | 5.0% | 85.7% | 73.5% | 54.0% | 20.0 months |
| 96.6% | 3.4% | 90.1% | 81.2% | 65.9% | 29.2 months |
| 98.0% | 2.0% | 94.1% | 88.6% | 78.5% | 50.0 months |
| 99.0% | 1.0% | 97.0% | 94.1% | 88.6% | 100.0 months |
Average lifetime is the reciprocal of the churn rate, so it rises very steeply as retention approaches 100%.
| Customers at start | retained 80% | retained 88% | retained 92% | retained 96% | retained 99% |
|---|---|---|---|---|---|
| 500 at start | 400 kept | 440 kept | 460 kept | 480 kept | 495 kept |
| 1200 at start | 960 kept | 1,056 kept | 1,104 kept | 1,152 kept | 1,188 kept |
| 2400 at start | 1,920 kept | 2,112 kept | 2,208 kept | 2,304 kept | 2,376 kept |
| 5000 at start | 4,000 kept | 4,400 kept | 4,600 kept | 4,800 kept | 4,950 kept |
| 12000 at start | 9,600 kept | 10,560 kept | 11,040 kept | 11,520 kept | 11,880 kept |
The percentage is applied to the opening base only; new customers are excluded entirely from both halves of the calculation.