Annual churn / year-1 retention

Formula

1 - (subs retained at 12mo / subs at start)

Unit

%

Models

Subscription

What it is

Annual churn / year-1 retention measures what fraction of annual subscribers cancel within their first 12 months, and its complement — the share who renew. It is the single most important retention metric for annual-plan subscription businesses.

How to calculate it

Track a cohort of subscribers from their subscription start date. At the 12-month mark, divide the number who cancelled (or did not renew) by the starting cohort size for the churn rate. Year-1 retention is 1 minus that figure, or equivalently: subscribers retained at 12 months divided by starting cohort.

Why it matters

Year-1 retention gates the economics of annual subscription businesses: customers who renew recoup acquisition cost and begin generating net profit. High year-1 churn makes CAC payback impossible on an annual-plan model and forces the business to rely entirely on new acquisition to maintain revenue, which is expensive and unsustainable.

Benchmarks & pitfalls

RevenueCat 2026 data shows approximately 72% of annual subscribers cancel within year 1 — worse than the ~56% recorded in 2025, suggesting a material deterioration in subscription stickiness. Correspondingly, year-1 retention sits at roughly 27–28%. These figures are sobering benchmarks: a product retaining 40%+ of its annual cohort through year 1 is significantly outperforming the market. When measuring, be precise about whether you count voluntary cancellations only or include involuntary failures; including the latter inflates apparent churn and may obscure fixable payment-recovery opportunities.