Industry Churn

[Eric Ullrich]

Hi All,

Any ideas of industry average on churn rates?  I've researched that for gyms its ~25%.  Curious about what people are experiencing at coworking spaces.

[Alex Hillman]

I haven't been able to get any quality industry statistics, mostly because people aren't tracking figures or aren't willing to share them. 

We fell into the former category until recently, but I can happily report that ours is between 2% and 5% :)

-Alex

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indyhall.org
betterwork.co

On Fri, May 16, 2014 at 9:29 AM, Eric Ullrich <er...@hackerlab.org> wrote:

Hi All,

Any ideas of industry average on churn rates?  I've researched that for gyms its ~25%.  Curious about what people are experiencing at coworking spaces.

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[Glen Ferguson]

Since we're the industry, I guess it's up to us to determine "average" by some means. At Cowork Frederick we're 7%.

[Andy Soell]

We're right around 6% as well, though the number varies wildly from month to month. It seems to fluctuate between 11% and 0%.

[Alex Hillman]

Since we're sharing & comparing, let's make sure that we're all using the same formula! :) 

I've seen tons of ways to count churn, some way more complex (and arguably more accurate) but very difficult to keep up to date. 

Here's the one we use. 

(Cancelled Customers ÷ Previous Month's Active Customers) x 100

P.s. If you use Stripe subscriptions, I highly recommend http://baremetrics.io for biz stats. Amazingly simple and powerful. 

​

It does user churn and revenue churn separately, too!

In the spirit of disclosure it was built by a buddy of mine, but I'd use/recommend regardless!

​

-Alex

 

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/ah
indyhall.org
betterwork.co

On Sat, May 17, 2014 at 09:32 AM, Andy Soell<aso...@gmail.com>, wrote:

We're right around 6% as well, though the number varies wildly from month to month. It seems to fluctuate between 11% and 0%.

[Will Bennis, Locus Workspace]

Hi Alex,

So, just to be sure I have it right:

(1) The formula you provided is for calculating monthly churn.

(2) If I wanted to calculate annual churn, I'd use the same formula, but count cancelled customers for the entire year and divide it by active customers at the end of the previous year (then transform from a decimal to a percent by multiplying by 100)?

(3) If I wanted to calculate average (mean) monthly churn for the previous year, I'd then devide the result from #2 by 12?

(4) How do you count canceled customers? Do you only count the ones who were included in your *Previous month's active customers* (or *Previous year's active customers* if measuring annual churn)? I could see arguments for and against, but if you *don't* restrict it to the members who were counted from the previous period, I'd worry that you get very different measures depending on the kind of space it is in a way you wouldn't necessarily want. A space that has a lot of short-term members (travelers, coworking visa users, day pass users, people who read about the business and want to see an exemplar model first hand, etc.), could easily have an annual churn of over 100% while growing in total membership and having a very satisfied user base. If only lost customers from the previous period are counted that same space might have a very low churn rate relative to other spaces that had much lower churn rates when inherently short-term members are included.

Will

[aso...@gmail.com]

I’m not sure what the best way to calculate churn on a scale longer than a month would be, especially when you consider members who have on boarded during that timeframe. Do you count them in the final “total members” number? What do you do with members who joined AND quit within the range you’re looking at? It doesn’t happen often, but occasionally we’ll get a member who joins specifically knowing that they’ll be quitting in a month—how do those factor in? Honestly, it’s probably not super helpful to look at churn that way, but rather look at it month-by-month as a trend.

I’m curious what you mean by “cancelled customers.” What else would you be looking at? I don’t think drop-in / non-members at all in churn rate, but ONLY members who are paying monthly.

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[Alex Hillman]

See, I told you guys churn is tricky. ;)

(1) The formula you provided is for calculating monthly churn.

Yep, though it could be adjusted for any recurring period.

 

(2) If I wanted to calculate annual churn, I'd use the same formula, but count cancelled customers for the entire year and divide it by active customers at the end of the previous year (then transform from a decimal to a percent by multiplying by 100)?

Yep, see above.

 

(3) If I wanted to calculate average (mean) monthly churn for the previous year, I'd then devide the result from #2 by 12?

A mathematician might correct me, but I think that's correct.

Here's the thing I learned about churn from my work in software subscriptions: its value is in being able to compare yourself to yourself, and it's VERY easy to get distracted by other peoples' churn.

(4) How do you count canceled customers? Do you only count the ones who were included in your *Previous month's active customers* (or *Previous year's active customers* if measuring annual churn)? I could see arguments for and against, but if you *don't* restrict it to the members who were counted from the previous period, I'd worry that you get very different measures depending on the kind of space it is in a way you wouldn't necessarily want. A space that has a lot of short-term members (travelers, coworking visa users, day pass users, people who read about the business and want to see an exemplar model first hand, etc.), could easily have an annual churn of over 100% while growing in total membership and having a very satisfied user base. If only lost customers from the previous period are counted that same space might have a very low churn rate relative to other spaces that had much lower churn rates when inherently short-term members are included.

"I'd worry that you get very different measures depending on the kind of space it is in a way you wouldn't necessarily want." 

Exactly why churn is relative to your business, and businesses that are more like it. 

Given that "coworking" is about as specific as "restaurant", comparing churn rates without more context could be like comparing McDonalds with French Laundry. :)

-Alex

[Alex Hillman]

I’m curious what you mean by “cancelled customers.” What else would you be looking at? I don’t think drop-in / non-members at all in churn rate, but ONLY members who are paying monthly.

Correct - we don't count drop-in & non-member revenue in our membership churn because...it doesn't make sense to. :)

-Alex

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/ah
indyhall.org
coworking in philadelphia

[Alex Hillman]

Been thinking more about this and realized that, by definition, "churn" only applies to subscription memberships and not one-off purchases (drop ins and other supporting revenue) because those charges don't carry a specific expectation of return purchasing.

Can you create a more complex formula that takes non-subscription charges into account for your churn? Possibly, but it would be far more effective to find a metric that is more relevant to that that part of the business. 

-Alex

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/ah
indyhall.org
betterwork.co