Contracted User Churn
The percentage of contracted user seats lost to outright cancellation in a period, excluding downsells and other partial reductions.
◆ Percentage
Formula
Built from
What it measures
The fraction of your contracted seat base that fully cancels in a period. It counts seats whose contract ends with no renewal — pure attrition. Downsells (10 seats trimmed to 5), pauses, and migrations to a different plan are excluded; only seats that drop to zero count.
Why it matters
Contracted user churn isolates the loss side of retention. Net metrics mix wins and losses, so a healthy net number can hide a leaking bucket — this rate strips that out and shows you exactly how fast contracted seats are walking out the door. Customer Success uses it to size churn-save effort, Product uses it to spot friction, and Finance uses it to forecast revenue at risk. It is the leading indicator behind every gross-retention and LTV figure.
How to read it
Lower is better, and you read it as a trend, not a single number. Compare this period to your trailing run-rate and to cohort peers — a Q2-2025 cohort churning faster than your Q2-2024 cohort means onboarding or product fit degraded. A month-over-month spike (say 3% to 6%) is a signal to investigate, not to average away. Always slice user churn by segment and cohort: a calm 2% blended rate can conceal a 7% bleed in new customers offset by a sticky long tail.
What good looks like
Good
Monthly contracted user churn in the low single digits, holding steady or falling across cohorts — a sign of disciplined retention and durable product fit at scale.
Watch
User churn drifting into the mid single digits month over month; dig into which cohorts or verticals are leaking and test onboarding or early-win plays.
Bad
Double-digit monthly user churn, or any rate trending sharply up — a systemic product, support, or pricing problem; pause growth spend and diagnose root cause.
Watch-outs
- Rolling downsells into the numerator. Contracted user churn is pure cancellation (seats to zero). Including partial seat reductions conflates retention failure with normal account right-sizing and inflates the rate.
- Using an average or closing seat count as the denominator. This metric needs the opening snapshot; an average or end-of-period base distorts the ratio and understates churn during a growth month.
- Trusting stale contract data. A seat flagged 'active' months past an overdue renewal inflates the base and hides real attrition — reconcile the contract table against billing every period.
- Confusing seat churn with revenue churn. One seat leaving a one-seat plan is 1 churned user but a small dollar hit; a seat leaving an enterprise plan is the reverse. Pair user churn with GRR to see the revenue weight.
Worked example
Hypothetical
You open June with 200 contracted seats. During June, 8 seats reach contract end with no renewal (downsells and pauses excluded). User Churn = (8 / 200) × 100 = 4.0% for the month.