Attrition Rate in Business: Meaning & Types

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

Read this lesson to learn how to calculate your business' attrition rate for both your employees and your customers. Learn what this number means and the uses it has.

What Is Attrition Rate?

What does attrition rate mean? Attrition rate, in the business world, refers either to lost customers or employee turnover. It is sometimes referred to as churn rate. Either way, it's the number of people that leave the company over a specified period of time. We can calculate the attrition rate using this formula:

  • Individuals lost / Number of individuals at beginning of time period x 100

We'll take a look at calculating attrition rates in just a moment. But first, let's talk about why attrition rate is an important number for businesses.

What Attrition Rate Means for a Business

Businesses often rely on their attrition rates to figure out how well they are keeping current customers and employees. The lower the attrition rate, the better for companies. The higher the attrition rate, the more individuals a business loses.

Outsiders look at a company's attrition rate to determine whether the company is good or not. For example, when a company needs to hire new employees, an potential hire may want to know its employee turnover rate. If it's too high, then that potential employee may not want to work for that company. A high attrition rate usually implies the company is doing something wrong, either in terms of management for employee attrition or customer service.

A low employee attrition rate usually means employees like working with the company and want to stay
attrition rate

Now, let's talk about calculating this rate for both employees and customers.

Attrition Rate for Employees

Employee attrition rate refers to the number of employees that leave a company over a specified period of time. Companies with a low employee attrition rate or employee turnover have employees that are happy and want to continue working for the company. Companies with a high employee attrition rate often have poor employee morale with a poor work environment.

To calculate this metric for a company, first you take the number of employees that have left over a specific time period, such as the past 30 days. Then, you divide it by the number of employees at the beginning of that time period. For example, let's say a local hamburger restaurant had 20 employees 30 days ago. At the end of those 30 days, 10 of those employees had left. The employee attrition rate for this hamburger restaurant for the past 30 days would be:

  • 10 / 20 x 100
  • 0.5 x 100
  • Attrition Rate = 50 percent

Attrition Rate for Customers

Customer attrition rate shows how many customers stop being customers during a specified time period. This metric is important as it shows how loyal or satisfied customers are. Lower attrition rates mean higher customer satisfaction and result in customer loyalty. Higher attrition rates usually mean lower customer satisfaction and result in customers leaving for a competitor.

To calculate customer attrition rate, you'll take the number of lost customers during a specific time period and divide it by the number of customers the company had at the beginning of the time period. For example, the same hamburger restaurant had 500 regular customers at the beginning of the same 30 day time period. Today, the restaurant has 495 regular customers. So over the past 30 days, the hamburger restaurant lost 5 regular customers. Using the formula, you divide 5 by 500, the number at the beginning of the time period to find your attrition rate:

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