Subscription churn: why a small monthly number compounds into a big problem
2% monthly churn sounds harmless. Compounded over a year, it means losing a real chunk of your subscriber base, without adding a single new signup.
Churn is the percentage of subscribers who cancel in a given month. Because it applies again and again to whoever's left, not to the original starting count, small monthly numbers compound into much bigger annual losses than they first appear to.
🎯 Explain Like I'm Hired Monthly churn eats into whoever's left each month, not the original group, so you can't just multiply the monthly rate by 12 to picture the year. It compounds, the same math as interest, just working against you instead of for you. Example: at 2% monthly churn, naive math says "24% gone in a year." But the real, compounded number leaves about 78% of subscribers, a 22% annual loss, close to that naive guess. At 5% monthly churn, naive math says "60% gone." But the real compounded number leaves only about 54%, a 46% annual loss. Naive multiplication overstates the damage at every rate, and the gap between naive and real grows fast as the monthly rate climbs, which is exactly why a "small" 5% monthly number should still worry a subscription business.
Retained subscribers after N months = Starting subscribers × (1 − monthly churn)^N
Sign up to keep reading
Sign up free to unlock the worked examples, edge cases, and interview traps below.