Gross churn is one of the most important metrics for subscription and recurring revenue businesses. It shows exactly how much customer or recurring revenue you’re losing over time. Understanding gross churn helps businesses identify retention problems early so that they can make better decisions about growth strategy and customer experience. Even a 5% increase in customer loyalty and retention can lead to an increase in profit, ranging from 25%–95%.

Below, we’ll explain what gross churn is, how it’s measured, and how businesses can analyze and reduce churn to build more sustainable growth.

What’s in this article?

• What is gross churn?
  
• Why is tracking gross churn important for recurring revenue businesses?
  
• How is gross churn measured?
  
• How is gross churn different from net churn?
  
• What internal factors commonly drive churn?
  
• What challenges arise when focusing on gross churn alone?
  
• How can businesses analyze and reduce gross churn effectively?
  

What is gross churn?

Gross churn measures how much of your existing customer base or recurring revenue you lose over a given period because of customers canceling or downgrading. Unlike net churn rates, it does not include any revenue or customers gained during that period.

Gross churn usually shows up in two forms: gross customer churn tracks the percentage of customers who leave, while gross revenue churn tracks the percentage of recurring revenue that’s lost because of cancellations or reductions in spend.

Why is tracking gross churn important for recurring revenue businesses?

Gross churn shows how much revenue disappears before anything else can offset it.

Here’s why tracking gross churn is important for subscription and recurring revenue businesses:

• Churn makes growth more expensive: Every customer or dollar lost has to be replaced just to tread water, which increases pressure on sales, marketing spend, and overall acquisition costs.

• Churn undermines revenue predictability: Higher or volatile churn makes forecasting less reliable, complicates budgeting, and weakens confidence in future cash flow.

• Churn signals customer experience problems: Because gross churn ignores upsells and expansion, it quickly surfaces issues such as weak onboarding, unclear value, and poor support.

• Churn affects investor and leadership confidence: Persistent churn raises questions about the durability of the business model and the long-term sustainability of recurring revenue.

• Churn compounds over time: Even small churn rates add up quickly, turning what looks like a manageable loss into a big drag on long-term growth.

How is gross churn measured?

Gross churn is measured by comparing what you lost during a period with what you started with.

Here’s how you measure gross churn:

• Start with a fixed baseline: Gross churn always uses the number of customers or the amount of recurring revenue at the beginning of the period.

• Measure only losses from existing customers: Count cancellations and downgrades that reduce recurring revenue; exclude new customers, upgrades, and expansions.

• Choose a consistent time frame: Annual and monthly churn are common; monthly helps spot trends early, while annual shows long-term retention.

• Calculate customer churn rate: Divide the number of customers who canceled during the period by the total number of customers at the start, then convert it to a percentage.

• Calculate revenue churn rate: Divide the recurring revenue lost from cancellations and downgrades by the recurring revenue at the start of the period.

Break out voluntary and involuntary churn, if possible. Voluntary churn comes from customer decisions, while involuntary churn comes from failed payments or billing issues. Each requires different solutions.

How is gross churn different from net churn?

Gross churn counts only the customers or recurring revenue that you lost because of cancellations or downgrades. Because it ignores growth, it reveals customer dissatisfaction, poor fit, and value gaps. This helps teams understand where customers are failing or leaving, especially at early stages or within specific segments.

Net churn includes gains inside your existing customer base. It subtracts expansion revenue from retained customers, such as upgrades or increased usage, from the revenue lost to churn. Strong expansion can offset losses, resulting in low or even negative net churn, which signals that remaining customers are spending more over time. Net churn is better for understanding scalability. Investors and executives often focus on net churn to assess whether the business can grow efficiently as it scales.

What internal factors commonly drive churn?

Churn is often the result of internal decisions that shape how customers experience, use, and pay for your product.

Common causes of churn include:

• Weak onboarding: Confusing setup, unclear next steps, or a slow path to early wins often lead to churn early on.

• Unclear or declining value: Customers churn if the product doesn’t solve a meaningful problem, usage drops over time, or value isn’t reinforced as customer needs evolve.

• Product gaps or reliability issues: Bugs, downtime, missing core features, or poor performance erode trust.

• Poor support: Churn often follows moments when customers feel ignored or unsupported.

• Bad customer fit: Attracting customers who don’t truly need the product or were oversold can lead to short-lived relationships.

• Pricing and plan mismatch: Customers might churn when subscription pricing doesn’t reflect perceived value or when plans don’t scale with usage.

• Involuntary churn from payment failures: Expired cards, failed charges, and weak retry processes can lose customers who never intended to leave.

What challenges arise when focusing on gross churn alone?

Without context, gross churn can push teams toward the wrong conclusions or the wrong fixes by:

• Ignoring expansion: Gross churn shows what you lost, but not what existing customers were added through upgrades or increased usage, which can dramatically change the revenue picture.

• Overemphasizing low-value losses: Losing many small customers might inflate churn rates without significantly harming revenue, while a single large churned account might have a much greater impact.

• Hiding segment-level problems: An acceptable or average overall churn rate can mask serious retention issues within specific customer segments, products, or regions.

• Not explaining why customers leave: Gross churn identifies loss, not cause. Teams are left guessing at root problems without qualitative data or usage analysis.

• Encouraging short-term fixes: Teams focused only on lowering churn could rely on discounts or heavy-handed retention tactics instead of addressing the underlying value gaps.

How can businesses analyze and reduce gross churn effectively?

Reducing gross churn starts with understanding it in context.

Here’s how to build a clear picture of who’s leaving, when, and why:

• Analyze churn by cohort and segment: Look at churn by signup month, customer size, plan type, industry, and region to uncover patterns that disappear in aggregate metrics.

• Pair churn with usage and value signals: Compare churned customers with retained ones across product usage, feature adoption, and engagement to identify leading indicators of risk.

• Benchmark against comparable businesses: Use industry and stage-appropriate benchmarks to understand what a “good” rate looks like, while recognizing that context matters more than averages.

• Separate voluntary and involuntary churn: Identify how much churn comes from failed payments vs. customer choice, since each requires different solutions.

• Strengthen onboarding and early activation: Help customers reach value quickly with clear guidance, milestones, and proactive support during the first critical months.

• Invest in customer success: Regular check-ins, fast issue resolution, and value reinforcement reduce churn by keeping customers confident.

• Continuously improve the product: Use churn feedback to prioritize reliability, core features, and improvements that directly address customer pain points.

• Reduce involuntary churn with better billing systems: Smart payment retries, card updates, multiple payment methods, and clear communication prevent customers from leaving unintentionally.

Stripe Sigma makes it easier for businesses to gain insight, track trends, and analyze patterns in their data down to the transaction level. Learn more about Stripe Sigma, or get started today.