client retention

The Client Retention Formula Every Business Should Know by Heart

Client retention is vital to the continued success of your company, and you should know as accurately as possible how you’re doing when it comes to holding on to the customers you have. The following explains a simple and accurate formula you can use to find out how many customers you’re keeping.

The Client Retention Formula

The following formula can help you determine your customer retention ratefor a viable period of time from a week to a year or longer.

Client Retention = ((CE-CN))/CS) x 100

CE is the number of customers you have at the end of the period.

CN is the number of new customers you’ve gained during that period.

CS is the number of customers you had at the start of the period.

First, subtract the number of new customers (CN) from the number of customers at the end of the period (CE). Divide that number by the number of customers you had at the start of the period (CS). Multiply that number by 100 to give you the percentage of customer retention.

For example, assume a one-month period in which a company started with 300 customers (CS=300). At the end of the month, the company had 250 customers left out of that 300 (CE=250). During the month, the company acquired 25 new customers (CN=25).

Inserting these values, the formula becomes [(250-25)/300] x 100. Breaking it down further, it becomes (225/300) x 100, then .75 x 100, then 75. In this example, the customer retention rate is 75 percent.

Whether a retention rate of 75 percent is good for your business will depend on your goals and the standards of your industry. In some high-turnover retail businesses, a 75 percent retention rate may be very good. For a subscription or membership-based business, 75 percent may be unacceptable. Strive to keep your retention rates as high as possible and you’ll reap the many rewards of satisfied, repeat customers.

When you apply the client retention formula, are your retention rates where you want them to be? If not, are some revisions to your client retention strategies in order?

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