How do you calculate the cost of churn?

Add the gross profit the lost customers would still have generated to the cost of winning replacements. With 5 customers at $800 MRR, 80% margin and 24 months left, that is $76,800 of profit, plus 5 × $6,000 CAC = $30,000, for $106,800.

Why multiply lost MRR by 12?

A customer who leaves this month is also missing from every following month, so one month of churn removes a full year of revenue from the next 12 months. $4,000 of lost MRR is $48,000 of annual revenue.

How do I estimate how long lost customers would have stayed?

A quick estimate is 1 ÷ monthly churn rate. At about 4% monthly churn, the average customer stays around 25 months. If you have cohort data, use the average remaining lifetime for accounts of the same age and size.

Free tool

Cost of Churn Calculator: What Lost Customers Really Cost

MRR lost = customers lost × average MRR. Annual impact = MRR lost × 12. Lifetime profit lost = MRR lost × gross margin × months they would have stayed. Replacement cost = customers lost × CAC. Losing 5 customers at $800 MRR costs $4,000 MRR, $48,000 a year, $76,800 in lifetime gross profit (80% margin, 24 months) and $30,000 to replace at $6,000 CAC: $106,800 in total.

Customers lost per monthAverage MRR per lost customer$Gross margin%Months they would have stayedmoExpected remaining lifetime. 1 ÷ monthly churn rate is a quick estimate.Cost to acquire a replacement (CAC)$Set to 0 to leave replacement cost out.

Total cost of one month's churn

$106,800

Each month of churn at this level costs $106,800 in lost profit and replacement spend. Keeping even one of those 5 customers saves $21,360, which sets a budget for retention work.

MRR lost per month

$4,000

Annual revenue impact

$48,000

Lifetime gross profit lost

$76,800

Replacement cost

$30,000

MRR lost = 5 × $800 = $4,000
Annual impact = $4,000 × 12 = $48,000
Profit lost = $4,000 × 80% × 24 mo = $76,800
Replacement = 5 × $6,000 = $30,000
Total = $76,800 + $30,000 = $106,800

Frequently asked questions

How do you calculate the cost of churn?: Add the gross profit the lost customers would still have generated to the cost of winning replacements. With 5 customers at $800 MRR, 80% margin and 24 months left, that is $76,800 of profit, plus 5 × $6,000 CAC = $30,000, for $106,800.
Why multiply lost MRR by 12?: A customer who leaves this month is also missing from every following month, so one month of churn removes a full year of revenue from the next 12 months. $4,000 of lost MRR is $48,000 of annual revenue.
How do I estimate how long lost customers would have stayed?: A quick estimate is 1 ÷ monthly churn rate. At about 4% monthly churn, the average customer stays around 25 months. If you have cohort data, use the average remaining lifetime for accounts of the same age and size.

About the author

Abdessamad Ghanem

Customer Experience & Customer Success Consultant · Founder of Clarivoxx

Abdessamad Ghanem works across Customer Support, Sales, Customer Success, Account Management and Partner Management. He writes Clarivoxx Insights for B2B SaaS professionals who own retention, adoption and customer outcomes.

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Abdessamad Ghanem