How to Calculate and Track Your Agency's Churn Rate

What is churn rate and how do you calculate it?

Churn is the percentage of clients you lose over a set period of time. As an agency owner, your goal is to reduce it, so clients get a better experience and stay with you.

The formula is simple: clients who left during the period, divided by clients at the start of the period, multiplied by 100. If you had 1,000 clients at the start of 30 days and 800 at the end, 200 left. Divide 200 by 1,000 and multiply by 100, and the churn rate is 20 percent. In an agency, the same maths applies to a smaller number. Start with 10 clients, end with 8, and your churn rate is 20 percent.

How do you get a rough estimate of your churn rate?

An estimate is a good place to begin, and it is the same step we take at the start of an audit. Answer three questions for a period you can measure accurately, such as three months:

1. How many active clients did you have at the start of the period?
2. How many new clients did you sign during the period?
3. How many active clients do you have now?

How do you work out the estimate?

Choose a period that matches the data you actually have. Do not pick 12 months if you do not know how many clients you had 12 months ago.

Then do the maths in two parts:

• Clients lost: clients at the start, plus clients signed, minus clients now.
• Total clients during the period: clients at the start, plus clients signed.
• Churn rate: clients lost divided by total clients during the period.
• Retention rate is what is left, which is one minus the churn rate.

Why is an estimate not enough?

An estimate is rough. You may not have exact numbers, and it cannot show churn over different periods or for different offers. To track churn properly, you need client level data.

How do you set up a churn tracker in a spreadsheet?

The tracker is a spreadsheet with a few tabs. Set it up in this order:

1. Add your services, such as done for you ads, social media or a done with you program. These become a filter later.
2. Add your employees. This is for larger agencies where several customer success managers look after clients. If you manage all your clients yourself, you can leave it as one name.
3. List every client with the retainer, the service, the assigned employee, the start date and, if they have left, the end date.
4. Start with your current clients. They have no end date, but a start date gives you a general picture. If you do not have the data for every client, begin with what you have.
5. Make it a habit to update the sheet when someone leaves, by adding the end date, and when someone joins, by adding the start date.

What can the tracker show you?

Once the data is in, the sheet calculates churn automatically. You can filter it in several ways:

• Date range. Choose a start and end date, such as one quarter, and it shows churn for only that period.
• Service. Pick one service to see its churn rate and find which offer needs work.
• Employee. Pick an account manager to see churn on their accounts. If one person has a low rate, find out what they are doing and share it with the rest of the team.
• All time. See the average retention period in months and how many clients fall into each retention band, such as long retention against under eight months.

How should you use your churn rate?

Churn is a lagging indicator, which means it reflects past events rather than predicting the future. There are two practical ways to use it.

First, identify problems. KPIs such as churn rate, response time and health score give you measurable insight so you can see where to invest, without managing everyone to find the issue. For example, if you keep signing clients but your revenue is not rising, and churn has increased over the last three months, marketing may not be the problem. Back end operations may be.

Second, measure results. Say you decide to improve your client journey or your customer success team. After a set period, change the date range and compare churn before and after. If it fell, keep going. If not, change your approach. This stops you guessing and stops your team from working on a fix that does not help.

How do you keep the data accurate?

Tracking a number the wrong way is as bad as not tracking it. If the sheet is out of date, you drive with false confidence. Unless you automate the updates, add every new client and every end date as it happens, and set a monthly reminder to check the sheet. Without that habit, the numbers will not be reliable.