Churn

The Business Glossary

RevenueCostProfitMarginCash flowEBITDABreak-evenBurn rateIncome statementBalance sheetCash flow statementAssetLiabilityAccrualDepreciationWorking capitalShareholderEquityValuationDilutionDebtVenture capitalIPODividendBusiness modelValue propositionMarket shareCompetitive advantageTAMB2B and B2CEconomies of scaleProduct-market fitLeadFunnelConversion rateCACLTVChurnPricingBrandSupply chainInventoryLead timeKPIOKRBottleneckOutsourcingSLAStakeholderBudgetForecastHeadcountP&L ownerROIOpportunity costSunk cost

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Money In & Out

Revenue: All the money a business earns from selling what it sells, before anything is taken away. The top line.
Cost: Money a business spends to operate and to make what it sells. Some costs change with sales; some don't.
Profit: What is left when all costs are taken away from revenue. The bottom line. Negative profit is a loss.
Margin: Profit shown as a percentage of revenue. Also the gap between price and cost on a single sale.
Cash flow: The actual money moving into and out of the business over a period. A company runs out of cash, not profit.
EBITDA: Earnings before interest, taxes, depreciation and amortization. Profit with some costs left out, to compare how operations perform.
Break-even: The point where revenue exactly covers costs: no profit, no loss. Below it you lose money, above it you make it.
Burn rate: How fast a loss-making company spends its cash, usually per month. Divide cash left by burn to get the runway.

Financial Statements

Income statement: The report that shows revenue, costs, and profit over a period. Also called the profit and loss (P&L).
Balance sheet: A snapshot of what a business owns, what it owes, and what's left for the owners, on a single date.
Cash flow statement: The report that shows where cash came from and where it went over a period, split into operations, investing, and financing.
Asset: Anything a business owns that has value: cash, equipment, inventory, money customers owe it, even patents.
Liability: Anything a business owes to someone else: loans, unpaid supplier bills, wages due, taxes due.
Accrual: Recording revenue when it's earned and costs when they're incurred, not when cash changes hands.
Depreciation: Spreading the cost of a long-lasting asset across the years it's used, rather than counting it all at once.
Working capital: Current assets minus current liabilities. The short-term cushion a business has to pay its bills.

Ownership & Funding

Shareholder: A person or organization that owns part of a company through its shares. Also called a stockholder.
Equity: Ownership of a company. Also the balance-sheet value left for owners once all debts are paid.
Valuation: What a company is estimated to be worth. For startups, set by what investors pay for a share of it.
Dilution: When a company issues new shares, each existing owner's percentage goes down, even though their number of shares stays the same.
Debt: Money borrowed that must be paid back, usually with interest. Doesn't give the lender any ownership.
Venture capital: Investment funds that buy equity in young, risky, fast-growing companies, hoping a few become huge.
IPO: Initial public offering. When a private company first sells shares on a public stock exchange.
Dividend: A share of a company's profit paid out in cash to its shareholders.

Strategy & Markets

Business model: How a business makes money: who pays, for what, how much, and how often.
Value proposition: The specific reason a customer should choose you: what problem you solve, for whom, better than the alternatives.
Market share: The percentage of all sales in a market that one company captures.
Competitive advantage: Something that lets a business beat its rivals in a way that's hard to copy. Also called a moat.
TAM: Total addressable market: the total revenue available if you sold to every possible customer. The ceiling on size.
B2B and B2C: Business-to-business vs business-to-consumer: whether your customers are companies or individual people.
Economies of scale: When making more of something lowers the cost of each unit. Bigger can mean cheaper.
Product-market fit: When a product satisfies a real market so well that customers keep buying and telling others, with little pushing.

Sales & Marketing

Lead: A potential customer who has shown some interest, such as signing up or making contact, but hasn't bought yet.
Funnel: The stages a person moves through from first hearing about you to buying, with fewer people at each step.
Conversion rate: The percentage of people who take a desired next step, such as visitors who sign up or trials that pay.
CAC: Customer acquisition cost: how much you spend on sales and marketing to win one new customer.
LTV: Lifetime value: the total profit you expect from one customer over the whole time they stay with you.
Churn: The rate at which customers stop buying or cancel over a period. The leak in the bucket.
Pricing: Deciding what to charge and how: the amount, the structure, and what each price includes.
Brand: What people think and feel about a company, beyond the product itself: its reputation and identity.

Operations

Supply chain: Every step and company involved in getting a product from raw materials to the customer.
Inventory: Goods a business holds to sell or to make things with: raw materials, work in progress, and finished products.
Lead time: How long it takes from starting a process to finishing it — for example, from placing an order to receiving it.
KPI: Key performance indicator: one of the few numbers a team watches to judge whether it is succeeding.
OKR: Objectives and key results: a goal-setting method pairing an ambitious aim with a few measurable results.
Bottleneck: The single slowest step in a process, which limits how fast the whole process can go.
Outsourcing: Paying another company to do work you could do in-house, like manufacturing, support, or payroll.
SLA: Service level agreement: a written promise about the level of service a provider will deliver, with consequences if it misses.

People & Decisions

Stakeholder: Anyone affected by, or with influence over, a business or a decision: owners, staff, customers, suppliers, and more.
Budget: A plan for how much money will be earned and spent over a period, used to set limits and priorities.
Forecast: A prediction of future results — like revenue, costs, or cash — based on data and assumptions, updated as things change.
Headcount: The number of people a company employs. Also each approved position in the plan.
P&L owner: The manager accountable for a business unit's revenue, costs, and profit — its own profit and loss.
ROI: Return on investment: how much you gain from spending money on something, compared to what it cost.
Opportunity cost: The value of the best alternative you give up when you choose one option over another.
Sunk cost: Money or effort already spent that can't be recovered, and so shouldn't affect what you decide next.

Sales & Marketing

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The rate at which customers stop buying or cancel over a period. The leak in the bucket.

Heard in the wild

We added 500 customers this quarter but revenue barely moved.

We lost 420. Our churn is eating all our new sales.

Connects to

Full definition

The rate at which customers leave — cancel a subscription, stop ordering, or move to a competitor — over a set period. If a company starts the month with 1,000 subscribers and 40 cancel, monthly churn is 4%.

Churn quietly limits growth. At 4% a month, a company loses roughly 40% of its customers over a year and has to replace them before it can grow at all. It also lowers , because customers who leave sooner are worth less, which makes a high harder to justify.

Businesses sometimes measure revenue churn separately from customer churn, because losing one big customer can hurt more than losing ten small ones. High churn usually points to a product problem — the doesn't hold up after purchase, or the company lacks — more than a marketing one.

Avoid: "attrition" is a synonym and fine; don't use "churn" for staff leaving without saying so, since it usually means customers.