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Learn how to calculate your renewal rate and get practical tips to improve it, boost customer loyalty, and strengthen your subscription business.
Your renewal rate isn't just a number that appears at the end of a contract; it's the final chapter in a customer's story with your brand for that period. Every interaction they've had—from their first day of onboarding to the quality of support they received—influences their decision to stay or go. A low rate is a clear signal that something in that journey is broken. By viewing this metric as a reflection of the entire customer experience, you can start to pinpoint weaknesses and make targeted improvements. It’s about understanding the 'why' behind the number and building the kind of long-term loyalty that makes renewal a no-brainer.
Think of your renewal rate as a report card from your customers. It measures the percentage of subscribers who choose to renew their contracts or subscriptions at the end of a term. In simple terms, it shows you if people are happy and find enough value in your product to stick around. A high
This metric is especially critical for subscription-based businesses, from SaaS companies to monthly box services. It’s a direct reflection of customer satisfaction and loyalty, and it's a core indicator of your company's long-term health. Unlike one-off sales, your business model depends on customers repeatedly choosing to stay with you. A low renewal rate can be an early warning sign of deeper issues, like a poor product fit, ineffective customer support, or a pricing model that isn't working. By consistently tracking this number, you gain a clear view of your customer base's health and the viability of your business model. It moves you from guessing about customer sentiment to knowing exactly where you stand. With this clarity, you can make smarter decisions and build a more sustainable revenue recognition model that stands on a foundation of happy, loyal customers.
A strong renewal rate is the foundation of a healthy, predictable business. When you know a high percentage of your customers will renew, you can forecast revenue more accurately and plan for growth with confidence. This stability is invaluable. More importantly, keeping an existing customer is far more cost-effective than acquiring a new one—studies show it can cost five times more to attract a new customer than to retain an existing one. High renewals mean you spend less on marketing and sales to replace churned customers, freeing up resources for product development and other growth initiatives. Beyond the financial benefits, renewal rates give you powerful insights into customer behavior. By analyzing renewal trends, you can identify what makes customers stay and what drives them away. This data-driven approach turns renewals from a simple metric into a strategic tool for growth.
It’s easy to get renewal rate mixed up with other customer metrics, especially retention rate. While they sound similar, they measure slightly different things. The renewal rate specifically tracks customers who make an active choice to continue their subscription. This could be signing a new contract or manually approving a payment. Retention rate is a broader metric that includes all customers who didn’t cancel, which might include those on auto-renewal who simply didn't take action to leave. Another closely related metric is churn rate, which is essentially the inverse of your renewal rate. Your churn rate is the percentage of customers who leave, so you can think of the formula as: Renewal Rate = 1 - Churn Rate. Focusing on the renewal rate gives you a clear picture of deliberate customer satisfaction and helps you build an experience that makes customers want to recommit.
Calculating your renewal rate seems straightforward, but the number you get depends entirely on what you choose to measure. You can look at it from the perspective of customer count or revenue, and each tells a different story about your business's health. The key is to understand which formula to use and when, so you can get a clear picture of customer loyalty and revenue stability.
Before you can find your renewal rate, you need to define the period you're measuring (monthly, quarterly, or annually) and identify two key groups: the total number of customers eligible for renewal during that time and the number of those customers who actually renewed. Getting this data right is the foundation for any meaningful calculation. For a complete overview, you can explore our guide for revenue growth which covers these concepts in more detail. Choosing the right metric will help you make better decisions, whether you're trying to gauge customer satisfaction or forecast future revenue.
The simplest way to measure your renewal rate is by focusing on your customer count. This is often called the Customer Renewal Rate, and it gives you a direct look at how many customers are choosing to stick with you.
The formula is: (Number of Customers Who Renewed / Total Number of Customers Up for Renewal) x 100
For example, if you had 200 customers whose subscriptions were ending in a quarter and 180 of them renewed, your customer renewal rate would be 90%. This is a fantastic starting point for understanding customer loyalty. It answers the fundamental question: Are our customers staying or leaving?
While counting customers is useful, understanding the financial impact of renewals is critical. This is where Gross Renewal Rate (GRR) and Net Renewal Rate (NRR) come in. Both metrics focus on revenue, not just customer numbers.
Gross Renewal Rate (GRR) measures the percentage of recurring revenue you retained from existing customers, excluding any expansion revenue like upsells or cross-sells. It tells you how well you're holding onto your existing revenue base.
Net Renewal Rate (NRR) takes it a step further. It includes revenue from renewals plus any expansion revenue from those same customers. NRR shows the full picture of revenue momentum from your existing base and is a powerful indicator of sustainable growth.
So, should you focus on customer count or revenue? The answer is both, because they reveal different things. The Customer Renewal Rate gives you a pulse on general satisfaction across your entire customer base. A dip here could signal a widespread issue with your product or service.
Revenue Renewal Rate (GRR and NRR) tells a financial story. You might have a high customer renewal rate, but if the few customers who churn are your highest-paying ones, your revenue renewal rate will suffer. Tracking both helps you see the whole picture. For instance, a high NRR (over 100%) means you're growing revenue even without acquiring new customers. Pulling this data often requires solid integrations between your CRM and billing systems to ensure accuracy.
Your renewal rate is a direct reflection of your customer’s experience. It’s not just a number that appears at the end of a subscription period; it’s the result of every interaction a customer has had with your brand, from their first day to their last. A low rate is a clear signal that something in that journey is broken. Understanding what influences a customer’s decision to stay or go is the first step toward building a more sustainable, profitable business.
Several key areas consistently impact whether a customer clicks "renew." These include how well you introduce them to your product, the smoothness of your billing process, the quality of your support, and whether your pricing aligns with the value you provide. By examining each of these factors, you can pinpoint weaknesses in your customer lifecycle and start making targeted improvements. For more ideas on how to refine your financial operations, you can find additional insights in the HubiFi blog. Let's break down the four biggest factors that shape your renewal rate.
A customer’s decision to renew often begins the moment they sign up. A strong onboarding process is your first and best chance to demonstrate your product's value. If new users feel confused, overwhelmed, or can't figure out how to get the results they were promised, they’ll mentally check out long before their subscription is up. The goal is to guide them to that "aha!" moment as quickly as possible.
This also ties directly to product fit. If you’re attracting customers who aren't a good match for your solution, they are almost guaranteed to churn. To maximize your retention efforts, you should segment your audience based on their needs and behaviors. This allows you to create personalized onboarding experiences and marketing messages that resonate with the right people, setting the stage for a long-term relationship.
Sometimes, customers leave without meaning to. This is called involuntary churn, and it’s often caused by simple technical issues, most commonly failed payments. Many customers leave because their credit cards expire or are declined for other reasons. If you don't have a system in place to handle these situations, you're losing revenue that should have been easy to keep.
Instead of letting these customers slip away, you can use automated tools to recover these payments. An effective dunning management process—which includes sending automated reminders and making it easy for customers to update their payment information—can capture a significant amount of this otherwise lost revenue. Ensuring your systems have seamless integrations with HubiFi can prevent these technical hiccups from turning into lost customers.
Once a customer is successfully onboarded, the relationship doesn't stop. Consistent engagement and high-quality support are essential for long-term loyalty. If a customer feels ignored or runs into problems with no clear solution, their frustration will build, making them unlikely to renew. Analyzing renewal rates is key to identifying customer satisfaction levels and recognizing the importance of retaining customers.
Great support isn't just about reacting to problems quickly; it's about being proactive. Regularly check in with customers, share helpful content, and ask for feedback. When customers feel heard and valued, they see you as a partner in their success, not just a vendor. This creates a strong, positive relationship that makes them want to stick around for the long haul.
Ultimately, renewals come down to a simple question in the customer's mind: "Is this still worth the price?" A high renewal rate means your customers are happy and find value in your product. If there's a mismatch between the price they pay and the value they feel they receive, they will look for alternatives.
This isn't about having the lowest price. It's about clearly communicating the benefits of your product and ensuring it consistently delivers on its promises. As your product evolves, so should your communication about its value. Regularly remind customers of the problems you solve for them and highlight new features that make their lives easier. When customers clearly see the return on their investment, renewing becomes an easy decision.
It’s easy to use "renewal" and "retention" interchangeably, but in the world of subscription metrics, they tell two different stories about your customers. Understanding the nuance between them is key to getting a clear picture of your business's health and making smarter decisions. While they're related, one measures a specific, active choice, while the other looks at the broader state of your customer base over time. Getting this right helps you focus your efforts where they'll have the most impact, whether that's improving your product's value or smoothing out the customer experience.
Think of the renewal rate as a measure of conscious commitment. It calculates the percentage of customers who reach the end of their subscription term and actively decide to sign up for another one. This is their moment of truth—are they getting enough value to say "yes" again? On the other hand, the retention rate is a wider lens. It tracks the percentage of customers who remain with you over a specific period, including those who actively renewed and those on auto-renew plans who simply didn't cancel. Retention tells you who stuck around, while renewal tells you who made a deliberate choice to stay.
So, when should you look at one over the other? Use your renewal rate when you want to gauge customer satisfaction and perceived value at a critical decision point. A low renewal rate is a red flag that customers aren't convinced your service is worth paying for again. It’s a direct signal to investigate your product, pricing, or onboarding. The retention rate is better for understanding overall customer loyalty and the "stickiness" of your product. A declining retention rate might point to broader issues like new competitors or a gradual decline in customer engagement. Using both metrics gives you a more complete story, helping you build data-driven strategies for growth.
So, what number should you be aiming for? It’s the million-dollar question, and the honest answer is: it depends. While there are general benchmarks that can give you a sense of where you stand, a "good" renewal rate is highly specific to your industry, business model, and even your price point. A B2B SaaS company with annual contracts will have a very different 'good' rate than a B2C subscription box service with monthly renewals. Instead of getting fixated on a single magic number that might not even apply to you, it’s far more productive to understand the context behind the numbers. This helps you set goals that make sense for your unique situation.
Think of it less as a pass/fail grade and more as a compass pointing you toward areas of strength and opportunities for improvement. A high renewal rate is a direct reflection of customer satisfaction and the value you provide, making it a powerful indicator of long-term health. It tells you that you're not just acquiring customers, but keeping them happy enough to stick around. Let's break down how to find your benchmark and set targets you can actually hit.
If you're looking for a quick reference point, most research suggests an 80-90% renewal rate is strong, while anything below 50% signals there’s work to do. But take these with a grain of salt. The most valuable benchmark you have is your own historical data. Tracking your renewal rate over time shows you what’s normal for your business and helps you spot trends before they become problems. While industry averages can be a helpful starting point, the best way to measure your performance is by competing against your past self. This approach accounts for all the unique factors of your business that broad industry stats simply can't capture.
Once you have a baseline, you can set achievable goals for improvement. Realistic targets aren't just numbers you pull out of thin air; they’re based on a clear understanding of your business and customers. Start by digging into customer feedback to find out why people are leaving and what you can do better. This is where you make data-driven decisions. By tracking key metrics like churn and customer lifetime value alongside your renewal rate, you get a fuller picture of your company's health. This allows you to set specific, measurable targets that directly address problem areas and contribute to sustainable growth, rather than just chasing an arbitrary percentage.
A low renewal rate rarely comes out of nowhere. It’s usually the result of several small, often overlooked, mistakes that build up over the customer's lifecycle. The good news is that once you know what these common pitfalls are, you can take direct steps to fix them. Most issues boil down to the customer experience—if people feel confused, ignored, or undervalued, they won’t stick around.
Think of your customer relationship as a long-term partnership. It starts with a strong first impression during onboarding and requires consistent, helpful communication. When you drop the ball on support, fail to notice when a customer is struggling, or only reach out when it's time to renew, you're sending a clear message that you don't value their business. Let's break down the most common mistakes that can quietly sabotage your renewal numbers and what you can do to avoid them. By focusing on a proactive and supportive approach, you can build the kind of loyalty that makes renewal a no-brainer for your customers.
The first few weeks with your product are critical. If a customer has a confusing or frustrating onboarding experience, they may never fully grasp how to get value from your service. This is where many companies spring a leak. A poor onboarding process can lead to high churn rates, creating a "leaky bucket" effect where you're constantly losing customers as fast as you gain them. If they don't understand the product, they can't use it effectively, and they certainly won't see a reason to renew when their contract is up. A smooth, educational, and supportive onboarding process sets the foundation for a long and successful customer relationship.
Even the best products require solid support. When customers run into an issue or have a question, they expect a quick and helpful response. Slow, inadequate, or hard-to-reach customer support is a major source of frustration that can quickly sour a relationship. It makes customers feel like you only cared about them until the sale was complete. This frustration is a powerful motivator for them to start looking at your competitors. A high renewal rate is a sign that your customers are happy and see value in what you offer. Consistently good support is a key part of that value, as it reduces the number of customers who leave and builds trust.
Customers rarely decide to leave overnight. They usually show warning signs long before their renewal date arrives. These signs can include a drop in product usage, a sudden increase in support tickets, or a lack of engagement with your communications. Ignoring these red flags is one of the biggest mistakes you can make. When you don't have clear visibility into customer health metrics, you're flying blind. Tracking this data is essential because a dip in engagement can signal that problems are coming. With the right analytics, you can spot these trends early and intervene before a minor issue becomes a reason not to renew.
Waiting until a month before a contract expires to check in with a customer is a recipe for low renewal rates. A reactive approach, where you only address problems as they arise, puts you on the defensive. Instead, you should be proactive from the moment a customer signs up. This means regularly checking in, offering helpful resources, and asking for feedback throughout their journey. Improving your renewal rate is an ongoing effort, not a last-minute scramble. By proactively managing the relationship and ensuring customers are consistently getting value, you make the renewal conversation a simple formality rather than a difficult negotiation. This is where having a clear view of your data can help you make smarter, more proactive decisions.
A low renewal rate isn't just a number—it's a signal that something in your customer experience needs attention. The good news is that you have the power to influence it. Instead of waiting for renewal dates to arrive with your fingers crossed, you can take concrete steps to build loyalty and make renewing a no-brainer for your customers. It all comes down to being proactive and focusing on the entire customer journey, from their very first interaction to their ongoing use of your product. By focusing on a few key areas, you can turn renewal time into a formality rather than a source of anxiety. Let's walk through four strategies where you can make a real impact.
First impressions are everything. A customer's initial experience with your product sets the tone for the entire relationship. A smooth and helpful onboarding process sets them up for success and makes them more likely to stay. If they feel confused or unsupported from day one, they're unlikely to stick around for the long haul. Your goal is to guide them to that "aha!" moment as quickly as possible. Create clear tutorials, send a series of welcome emails with helpful tips, and consider assigning a dedicated contact person for their first few weeks. When customers feel confident using your product, they see its value right away.
Don't let your only communication with customers be when they have a problem. Building a strong relationship requires consistent, positive interaction. Regular check-ins and understanding their needs can keep customers happy and loyal, leading to more renewals. Send out a monthly newsletter with product updates and best practices, or schedule brief quarterly calls to discuss their goals. This kind of proactive outreach shows you’re invested in their success, not just their subscription fee. It transforms your relationship from a simple transaction into a true partnership, making them feel valued and understood.
Sometimes, churn has nothing to do with customer satisfaction. Many customers leave simply because their credit cards expire or fail. This is called involuntary churn, and it’s one of the most preventable reasons for losing a customer. You can use tools to automatically recover these payments. An automated payment recovery system, often called dunning management, can send reminders before a card expires and automatically retry failed payments. By automating this process, you can recover revenue that would otherwise be lost and save your team from awkward collection calls. Ensuring your systems have seamless integrations with your payment processor is key to making this work.
You can't fix problems you don't know exist. Creating a system to consistently gather and act on customer feedback is essential for improving your service and product. Analyzing renewal rates is key to identifying customer satisfaction levels and predicting future business success. Use simple tools like Net Promoter Score (NPS) surveys, send out questionnaires after a customer support interaction, or simply schedule calls to ask for honest feedback. The most important part? Closing the loop. Let customers know you’ve heard their suggestions and share what you’re doing to address their concerns. You can find more insights on using data to understand your customers on our blog.
Manually tracking renewal rates in a spreadsheet is a recipe for missed opportunities and inaccurate data. As your business grows, you need a reliable system to monitor customer contracts and predict future revenue. The right tools don't just calculate a number; they give you a clear, real-time view of customer health, helping you spot risks and act before a customer decides to leave. Think of it as your command center for customer retention.
Your tech stack is crucial here. When your data is scattered across different platforms, getting a single, accurate renewal rate is nearly impossible. The goal is to create a seamless flow of information from your CRM and payment processor to your accounting software. This unified view is what allows you to move from simply tracking renewals to actively improving them. By investing in the right tools, you can automate the busywork and focus your energy on what really matters: keeping your customers happy and successful.
For many businesses, the best place to start tracking renewals is with a tool you already use: your Customer Relationship Management (CRM) platform. Systems like Salesforce or HubSpot are designed to be the central source of truth for all customer information, including contract start and end dates. Most modern CRMs have built-in reporting features that let you create dashboards to monitor key metrics like renewal rates, churn, and customer lifetime value.
Before you invest in a new piece of software, explore what your current CRM can do. You might be surprised by its capabilities. By setting up custom reports, you can track renewals by customer segment, contract size, or even by the account manager. When your CRM integrates with your financial systems, you get an even more powerful view, connecting customer activity directly to revenue outcomes.
As you scale, especially if you manage a high volume of subscriptions or complex contracts, dedicated renewal management software can be a lifesaver. These tools are built specifically to track, manage, and automate the entire contract renewal process. They send automated reminders to your team and your customers, flag at-risk accounts, and streamline the administrative tasks that often cause renewals to fall through the cracks.
This kind of automation frees up your team from chasing down paperwork and allows them to focus on building relationships. When you combine a renewal management tool with an automated revenue recognition platform, you ensure that your financial reporting is always accurate and compliant. If you're curious about how automation can transform your financial operations, you can schedule a demo to see it in action.
Your renewal rate is a critical health indicator, but it doesn’t tell the whole story on its own. To get a complete picture of customer retention and business growth, you need to track it alongside a few other key performance indicators (KPIs). Looking at these metrics together helps you understand the why behind your renewal numbers and provides a more nuanced view of your company’s performance.
In addition to your core renewal rate, make sure you’re monitoring customer churn, customer lifetime value (CLV), and expansion revenue from upsells or cross-sells. For example, a high renewal rate is great, but it's even better if you also have strong expansion revenue, as it shows your customers are finding more value in your offerings over time. You can find more deep dives on important financial metrics on our blog.
Your renewal rate is more than just a number to report—it’s a powerful tool that tells you a story about your customer relationships and the health of your business. When you treat this metric as a guide, you can move from simply tracking renewals to actively improving them. By digging into the data, you can uncover the reasons customers stay or leave, allowing you to make smarter, more strategic decisions.
This means turning insights into action. A dip in renewals might point to a clunky onboarding process, while a high rate among a certain customer segment could reveal what you’re doing right. The key is to build a system where you’re constantly learning from your renewal data and using those lessons to strengthen customer loyalty and create a more stable revenue foundation. Let’s look at how you can put this into practice.
A solid renewal strategy starts with listening. By leveraging renewal rate metrics, you can make data-driven decisions that directly impact customer retention and revenue. Your goal is to pinpoint exactly where things might be going wrong by collecting and analyzing customer feedback. Are customers struggling with a specific feature? Do they feel they aren’t getting enough value for the price? Answering these questions helps you address concerns before they lead to churn.
This approach allows you to be proactive rather than reactive. Instead of waiting for a customer to cancel, you can identify at-risk accounts based on their usage patterns or support history and step in with targeted help. This focus on customer satisfaction and loyalty is what turns a good renewal rate into a great one.
To make good decisions, you need good data. A common mistake is including new customers in your renewal rate calculation. When you’re calculating the rate for a specific period, you should only count customers who were up for renewal during that time. New sign-ups haven’t had the chance to renew yet, so including them will skew your numbers and give you a false sense of security.
Getting this right is crucial because an accurate renewal rate helps you predict future revenue. A high rate points to steady income, while a low one signals that you might need to spend more on acquiring new customers to fill the gap. Ensuring you have accurate data from all your systems is the first step to understanding customer loyalty and forecasting your business’s success.
**Should I focus more on my customer renewal rate or my revenue **Honestly, you need to track both because they tell you different parts of the same story. Your customer renewal rate gives you a great pulse on general satisfaction—if that number dips, it could mean a widespread issue with your product or support. The revenue renewal rate, however, tells you about the financial health of your business. You could have a high customer renewal rate, but if the few customers who leave are your biggest accounts, your revenue will take a serious hit. Looking at them together gives you the full picture.
How often should I calculate my renewal rate? The right frequency depends on your business model. If you have monthly subscriptions, calculating your renewal rate every month and quarter is a good idea to spot trends quickly. For businesses with annual contracts, a quarterly and annual calculation makes more sense. The key is consistency. Choose a timeframe that allows you to see meaningful patterns without getting lost in noise, and stick with it so you can compare your performance over time.
Can my renewal rate be over 100%? Yes, it absolutely can, and that’s a fantastic sign of healthy growth. This happens when you calculate your Net Renewal Rate (NRR), which includes not just the revenue from renewals but also any expansion revenue from those same customers. Expansion revenue comes from things like upsells or cross-sells. When your NRR is over 100%, it means you're growing your revenue from your existing customer base faster than you're losing it, which is a powerful engine for sustainable growth.
My renewal rate is low. What's the very first step I should take to fix it? Before you change anything, you need to understand why customers are leaving. The first and most important step is to talk to them. Reach out to customers who recently churned and ask for their honest feedback in a brief, respectful way. At the same time, look at your data to find patterns. Are customers who leave using a specific feature less than others? Do they stop logging in after a certain point? This combination of direct feedback and data analysis will give you a clear starting point.
Is it possible to automate renewal tracking? Yes, and you absolutely should. Manually tracking renewals in spreadsheets is time-consuming and prone to errors, especially as you grow. Using your CRM or dedicated renewal management software can automate the entire process. These tools can track contract end dates, send reminders, and give you a real-time dashboard of your renewal metrics. This frees you up from administrative work so you can focus on building relationships and acting on the insights your data provides.
Former Root, EVP of Finance/Data at multiple FinTech startups
Jason Kyle Berwanger: An accomplished two-time entrepreneur, polyglot in finance, data & tech with 15 years of expertise. Builder, practitioner, leader—pioneering multiple ERP implementations and data solutions. Catalyst behind a 6% gross margin improvement with a sub-90-day IPO at Root insurance, powered by his vision & platform. Having held virtually every role from accountant to finance systems to finance exec, he brings a rare and noteworthy perspective in rethinking the finance tooling landscape.