How to calculate customer retention rate
Customer retention rate is the positive mirror of logo churn: the share of customers who stay rather than leave. It is a fundamental health metric for any recurring-revenue business.
The one subtlety is excluding new customers from the numerator, so you measure how many of the original base you kept, not how much the base grew from new acquisition.
- (End - new) / start The formula
- Excludes new customers Measures the original base
- Mirror of churn Retention plus churn is 100%
Short answer
Customer retention rate is the percentage of customers you keep over a period. Subtract new customers gained from the customers you have at the end, divide by the customers you had at the start, then multiply by 100. If you started with 500, gained 50, and ended with 520, retention is (520 minus 50) divided by 500, or 94 percent.
Step by step
Count customers at the start
Take the number of customers at the beginning of the period as your denominator.
Count end customers and new adds
Count customers at the end of the period and, separately, the new customers acquired during it.
Subtract new from end
Subtract new customers from end customers to isolate how many of the original base remain.
Divide by the start count
Retention rate equals (end customers minus new customers) divided by start customers, times 100. Retention plus logo churn equals 100 percent.
Worked example
You start the quarter with 800 customers. During the quarter you gain 120 new customers and end with 860.
Retention rate = (860 minus 120) divided by 800 = 740 / 800 = 92.5 percent. That means you kept 92.5 percent of your original base and lost 7.5 percent, which is your logo churn. The 120 new customers are excluded so retention reflects the existing base only.
How Ardovo handles it
Ardovo computes customer retention rate by cohort and segment from live data, keeping new customers out automatically. Rook flags segments where retention is slipping and predicts at-risk accounts, so you can act before they leave.
Frequently asked questions
What is the customer retention rate formula?
End-of-period customers minus new customers acquired, divided by start-of-period customers, times 100. Excluding new customers ensures you measure how much of the original base you kept, not growth from acquisition.
What is the difference between retention rate and churn rate?
They are mirror images: customer retention rate plus logo churn rate equals 100 percent. Retention measures the share of customers you keep; churn measures the share you lose over the same period.
Why exclude new customers from retention?
Because retention measures how well you keep existing customers, not how fast you add new ones. Including new customers would inflate the rate and conflate acquisition with retention, hiding a churn problem behind growth.