That formula is more correct, but only assuming you don't replace any churned customers – or at least, replace them all at once at the end of the year, which se

That formula is more correct, but only assuming you don't replace any churned customers – or at least, replace them all at once at the end of the year, which seems like a pretty unreasonable assumption to me. If you replace customers every month then the number leaving per month is constant, so you end up churning 0.05×12 = 60% of your userbase per year. Edit: The 12x model is also pretty coarse, but you can take the limit of continuous replacement, and you end up churning -12log(1-x) = 0.616 × your customer base per year.