The Math Behind Successful As-A-Service: Understanding And Calculating Churn

By Gregg Lalle, ConnectWise

In the first part of our series ‘The Math Behind Successful As-a-Service,’ we’re breaking down all things churn: what it is, why it matters, how to calculate it, and, of course, how to minimize it within your organization. Read on for churn-related insights and tips.

What Is Churn?

Sometimes referred to as attrition or turnover, churn is your number of customers at the beginning of a period minus your number of customers at the end. It calculates the overall difference but excludes any new sales over that period. Customer churn can include cancellations, non-renewals, or customers switching to another provider.

While some churn is to be expected in every organization, it’s important to garner insights into its specific causes within your customer base so that you can respond and adjust—and minimize your rates.

Why Does Churn Matter?

For subscription-based companies like your MSP organization, understanding and calculating your revenue and/or customer churn rates is critical to gauging customer health and satisfaction. It signals whether you’re meeting, exceeding, or falling short of your customers’ expectations—and it lets you know how loyal they are to your organization.