Annual churn rate is the percentage loss of customers—or revenue—per year.
Running a yearly analysis of your customer and revenue churn will help you understand your profit and loss (P&L) throughout the (fiscal) year. Tracking annual churn rate can also help you get buy-in to prioritize customer retention.
Annual customer churn rate = (Number of lost customers during 12 months / total number of customers at beginning of 12 months) x 100
Annual revenue churn rate = (Total lost revenue during 12 months / total expected end-of-year revenue) x 100
For example, if you started the year with 300 customers with a collective annual contract value (ACV) of $7900, and 40 of those customers churned with a collective ACV of $2280, your annual churn rates would be:
(40 / 300) x 100 = 13% annual customer churn rate
(2,280 / 7,900) x 100 = 28% annual revenue churn rate