What is customer churn rate?

Customer churn rate equals customers lost divided by customers at the start, multiplied by 100. Revenue churn applies the same idea to dollars, and it can differ when the customers who leave are larger or smaller than average.

Timing matters as much as the rate. Early churn, within the first months, usually points to a fit or expectations problem, meaning the customer was never the right buyer. Late churn usually points to value, service, or competitive problems. As a rule of thumb, when most customers leave, the cause is more often who was sold to than how well they were retained.

It affects CAC because a customer who churns before repaying their acquisition cost never produces a return on the spend that won them. High churn forces a company to win more replacement customers to grow, which raises the real cost of growth and lowers the LTV:CAC ratio even when the acquisition engine is performing well. Improving retention is usually the fastest way to move that ratio.