Net revenue retention

Churn rate is the percentage of customers who stop doing business with a company during a set period. It’s calculated as customers lost during the period divided by customers at the start of the period. Logo churn counts customer accounts. Revenue churn measures dollars lost. The two figures can diverge if the customers who left were smaller than average. Churn also splits by cause: voluntary churn, where customers choose to leave, and involuntary churn, caused by failed payments or expired cards. A monthly subscription and an annual contract produce structurally different churn math, so comparisons only hold within the same industry and billing cycle.

Customer lifetime value is the total gross margin a business expects to earn from a customer across the full relationship. It is not the revenue that customer generates. A workable formula is average purchase value multiplied by purchase frequency, multiplied by average customer lifespan, multiplied by gross margin. Historic CLV sums the margin a customer or cohort has already delivered. Predictive CLV forecasts future margin and discounts it to present value. The most common error is substituting revenue for margin. That substitution inflates CLV and leads teams to justify acquisition spending that a true margin-based figure would not support.

A customer health score is a composite, weighted metric that combines multiple account signals into a single indicator of renewal, expansion, or churn risk. Inputs typically include product usage depth and frequency, support ticket volume and severity, survey responses such as satisfaction or effort ratings, invoice and renewal signals, and stakeholder engagement across the account. Providers assign weights to each input based on its correlation with retention outcomes. The resulting score gets bucketed into bands, commonly red, yellow, and green, to flag risk level at a glance. No standard formula or weighting scheme exists; the mix reflects each business’s product and customer base. Customer success teams use score drops to trigger outreach before renewal is at risk.