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
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
× your customer base per year.