How to model customer churn and revenue impact
How the churn impact simulator works
The model starts with the current customer count. Each month it removes the selected churn percentage from that opening base, adds a fixed number of new customers, and multiplies the ending customer count by average monthly revenue per customer.
It runs that same sequence twice: once with current monthly churn and once with the target rate. The difference shows how retention compounds when acquisition and average revenue remain unchanged.
- Customer churn is modeled as a percentage of the opening customer base each month.
- New customers are added after churn and held constant in both scenarios.
- MRR equals modeled ending customers multiplied by average monthly revenue per customer.
- Cumulative revenue adds each modeled month's MRR; it is not recognized accounting revenue or cash collected.
Why one churn point can matter
Monthly churn compounds. Retaining one additional customer this month also preserves the chance to retain that customer next month. That is why a move from 5% to 4% monthly churn can have a much larger long-run effect than the one-point change suggests.
Read the result as a scenario, not a promise. Real cohorts behave differently by plan, acquisition channel, company size, tenure, and product usage. Segment-level retention work is more actionable than one blended rate once you have enough data.
Check your numbers before making a plan
The simulator holds new-customer acquisition and average monthly revenue constant. It excludes upgrades, downgrades, reactivations, seasonality, gross margin, involuntary churn, and changes in acquisition caused by product improvements.
Reconcile the model with customer-level subscription records. Track logo churn and revenue churn separately, then use the MRR calculator to see expansion, contraction, new revenue, and churn in one waterfall.