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Annual churn from a monthly rate

Compound the retention factor across the months in the year, then subtract from one. With c = 0.04 and m = 12 this gives 0.38729024267023293, not 0.48.

The Formula

Annual = 1 - (1 - c)^m

Compound the retention factor across the months in the year, then subtract from one. With c = 0.04 and m = 12 this gives 0.38729024267023293, not 0.48.

SymbolMeaning
cMonthly churn rate as a decimal
mNumber of compounding months
AChurn over the whole span

What Each Symbol Means

cdecimal

Monthly churn rate as a decimal

The output of the monthly formula. 0.04 here.

mmonths

Number of compounding months

12 for a year, 3 for a quarter. 0.96^12 = 0.6127097573297671 is the retained share.

Adecimal

Churn over the whole span

0.38729024267023293 for 4% a month across twelve months. Always below m times c.

See It Worked With Real Numbers

A formula on its own does not tell you which number goes where. The how to calculate churn rate page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.

Where This Formula Appears

This equation is the working core of How To Calculate Churn Rate, filed under Business. Every number the guide produces comes from substituting into this one line.