Involuntary churn counts the customers you lose to failed payments, not to cancellations.

It matters because these customers did not decide to leave.

A customer who cancels has made a choice, and you can learn from it by asking why. A customer lost to a failed card made no choice at all. The product and the price already worked for them, so the fix is in billing, not in the product.

Keeping the two kinds of churn apart also stops you from solving the wrong problem. A month of expired cards and a month of unhappy customers can show the same churn rate and need opposite responses.

Split total churn into the part that came from unpaid failed payments.

involuntary churn rate = customers lost to unpaid failed payments ÷ customers at the start × 100
voluntary churn rate = customers who cancelled ÷ customers at the start × 100
total churn rate = voluntary + involuntary

A customer counts as involuntary churn only when retries and reminders have ended without payment. While a failed payment is still being retried, it is open, not lost.

In this example, 15 of the 45 customers lost, one in three, never chose to leave.

You reduce it at three points: before the charge, at the charge and after it fails.

• Before the charge, start with a card that can pay. Checking the card at signup turns away cards that cannot cover the price, and card updater services keep stored cards current.
• At the charge, retry soft declines over days. A payment declined for missing funds may go through later in the week.
• After a failure, run a dunning plan. Emails with a direct link to update the card, a grace period and a clear end date. The dunning page lays out the steps.
• Offer another way to pay. A second card or a bank payment gives a failed charge somewhere else to go.

1Capture works at the first point, for SaaS free trials. It authorizes the full first payment when the trial starts and collects it in the last two hours of the trial, retrying up to 10 times. A card that cannot cover the price is declined at signup instead of turning into involuntary churn at the first charge. See how it works.

These mistakes hide involuntary churn inside other numbers.

• Reporting one churn number. Without the split, a billing problem looks like a product problem.
• Counting churn on the first failed attempt. While retries run, the payment is open. Count the customer as churned when dunning ends without payment.
• Treating a recovered customer as new. Someone who updates the card after a lapse is a recovery. Counting them as a new signup inflates both churn and growth.
• Skipping the dollar view. Count the MRR lost to failed payments as well as the customers, since larger accounts weigh more.