Blog · Board and management reporting
The difference between renewal rate, retention rate and churn rate, which denominator each uses, why they do not add to 100 percent, how each is computed on customers and on revenue, the period and cohort rules that make them comparable, and a worked example where the three tell three different stories about the same quarter.
Three rates, three denominators, and decks that use them interchangeably. This guide sets out each definition, why they do not add up to one another, the customer and revenue basis of each, and a worked quarter where the three say three different things.
| Rate | Numerator | Denominator | Question |
|---|---|---|---|
| Renewal | Contracts renewed | Contracts due for renewal in the period | Of what came up, what did we keep? |
| Retention | Customers or revenue present at end, from the starting base | Starting base | Of what we had, what remains? |
| Churn | Customers or revenue lost from the starting base | Starting base | Of what we had, what left? |
Retention + churn = 100 percent, on the same basis. Renewal is outside that identity.
Customer identifiers only.
starting base = retained + churned, on customers and on revenue contracts due = renewed + not renewed
A customer counted as churned that still has revenue at period end fails the first; a contract due with no outcome fails the second.
Starting base: 640 customers, $22.0m annualised revenue. Contracts due this quarter: 160, worth $5.8m.
| Rate | Customer basis | Revenue basis |
|---|---|---|
| Renewal | 144 of 160 = 90% | $4.9m of $5.8m = 84% |
| Retention | 598 of 640 = 93% | $19.6m of $22.0m = 89% |
| Churn | 42 of 640 = 7% | $2.4m of $22.0m = 11% |
Renewal looks fine at 90 percent by count and less fine at 84 by value: the renewals lost were the larger ones. Churn is 7 percent of customers and 11 percent of revenue, and only sixteen of the forty-two churned customers came from the renewal cohort; the other twenty-six left mid-term, which the renewal rate cannot see.
Renewal quoted as retention. Half the base was not due; the rate describes the other half.
Customer basis only. Ninety-three percent, while the largest customers leave.
Starting base restated. New customers added to the denominator mid-period flatter retention.
Mid-term churn unowned. Not a renewal, not on any list.
Mapped once, the customer master, the contracts and the ledger produce all three rates on both bases, the identities and the mid-term churn list every quarter. Covirage builds this from the exports as they are. The net revenue retention guide covers the cohort version for subscription revenue, and the B2B churn guide covers churn where there is no contract event at all.
Because churn's denominator is every customer at the start, and renewal's is only the customers whose contracts were due. A company with 90 percent renewal and half its base not up for renewal this quarter has 5 percent churn from renewals plus whatever left mid-term.
Both, always. Customer retention of 92 percent with revenue retention of 84 says the customers that left were larger than average. Revenue retention above customer retention says the base grew at the customers that stayed, which is net retention territory.
A fixed period, quarter or year, with the starting base fixed at its first day and no customers added to it during the period. New customers in the period are not in any of the three; they are new.