Non-Renewal vs Churn

Churn tells you what happened to your customer base. Non-renewal tells you what your customers decided.

The formula

Churn rate = Customers lost ÷ Total customers (over a period)

Non-renewal rate = Customers who could have renewed but didn’t ÷ Customers up for renewal (over a period)

They look similar. They measure different things.

What churn measures

Churn captures the net effect on your customer base — how many fewer customers you have at the end of the period than the start. It’s a rear-view mirror on customer count.

For a subscription business, churn typically runs 5-15% annually for healthy B2B SaaS, higher for B2C or transactional models. The number matters because it determines how much new business you need just to stand still.

What churn hides

Churn conflates two distinct phenomena: customer decisions and sales performance.

A company losing 20% of customers annually but adding 25% new ones reports 5% net growth. The churn rate might even be presented as “net churn” of negative 5% — looks healthy. But the underlying retention problem is masked by strong sales execution.

The causes are completely different. Poor retention is usually a product, onboarding, or customer success problem. Strong acquisition is sales and marketing. Churn blends them into a single number that obscures where to focus.

There’s a second conflation: logo churn (customer count) versus revenue churn. A business might lose 5% of customers but 15% of revenue if the departing customers are disproportionately large. Or the reverse — high logo churn concentrated in small accounts that barely move the needle. Customer count and revenue tell different stories.

What non-renewal measures

The non-renewal rate isolates the renewal decision. Of the customers who had the opportunity to renew this period, how many chose not to?

This strips out new business entirely. You’re measuring pure customer satisfaction with the product and relationship — their revealed preference when the moment of truth arrives.

It’s a leading indicator: whether your existing customers are voting with their feet, before that signal gets diluted by whatever the sales team is doing.

Where it breaks down

The metric has four limitations.

Contract structure effects. If you have a mix of monthly and annual contracts, non-renewal rates aren’t directly comparable. Monthly customers face twelve renewal decisions per year; annual customers face one. A 2% monthly non-renewal rate compounds to 21% annually — worse than a 15% annual non-renewal rate, though the monthly number looks smaller.

Cohort quality shifts. If your recent cohorts are structurally different from older ones (different market segment, different price point, different onboarding), the aggregate non-renewal rate blends unlike things. A startup that moved upmarket might see non-renewal improve simply because enterprise customers churn less than SMB — not because retention actually got better.

Forced renewals. Multi-year contracts, auto-renewals with friction, or contractual lock-ins suppress non-renewal without improving underlying satisfaction. The customers are still unhappy; they just haven’t had the chance to leave yet. When the contract ends, the backlog of dissatisfaction releases all at once. PE investors call this “renewal cliff” risk.

Equal weighting. A flat non-renewal rate treats all customers the same. But losing your largest account is not the same as losing ten small ones, even if the logo count matches. Value-weighted non-renewal — revenue at risk from non-renewals ÷ revenue up for renewal — tells you whether the defectors matter.

The decision it enables

The question becomes specific: are we keeping the customers we already have?

High non-renewal but acceptable churn means you’re papering over a retention problem with sales. That works until sales performance dips or acquisition costs rise — then the underlying weakness surfaces. Better to know now.

Low non-renewal but slow growth means the constraint is acquisition, not retention. You have a product customers want to keep; you need more of them to try it.

The action differs completely depending on which problem you have. Churn blurs the diagnosis. Non-renewal sharpens it.

The metric series: Part of a series on metrics that reveal what headline numbers hide.

See also: Limits to Growth for how churn compounds over time and creates a ceiling on business growth.