Subscription Pricing Calculator — Methodology

Step-by-step calculation

Find the right annual-discount level by comparing customer lifetime value on monthly vs annual subscriptions.

1. 1

   Enter monthly price and annual discount

   Standard is 17% ("2 months free") but anywhere from 10-25% is normal.

2. 2

   Set monthly and annual churn rates

   Annual churn is typically 2-3× lower than monthly × 12 due to commitment.

3. 3

   Set gross margin

   Revenue minus variable cost of delivery.

4. 4

   Read the break-even discount

   The discount at which annual LTV exactly equals monthly LTV. Anything below it is a positive trade.

Assumptions and overrides

Simplified LTV formula: ARPU × gross margin × lifespan (in months for monthly, years for annual). Does not model upgrade/downgrade between tiers, win-back of churned customers, or seasonal churn variations. Real cohort analysis using your own data is recommended past $1M ARR.

Every region default on the calculator is editable. If your effective rate, fee, or threshold differs from the headline figure shown, type your own number into the field — the calculator recomputes instantly without leaving this page.

Review cadence and corrections

This methodology and the underlying rate defaults are reviewed at least annually, and immediately following any change to the headline rate from IRS, HMRC, or SARS. Every substantive update is recorded on the public changelog. Spotted an error? See the corrections policy for how to report it.

See the full editorial policy for the standards every page on BusCalcTools is held to.