Subscription Pricing Calculator
Get your MRR, ARR, and churn-adjusted customer LTV in one pass — and see what an annual-plan discount really trades for upfront cash.
Written by Dorothy Ibrahim, 10+ years in banking & finance
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How we calculate this
This calculator turns four subscription numbers — subscribers, monthly price, churn, and gross margin — into the metrics that actually run a recurring-revenue business: MRR, ARR, average customer lifetime, and churn-adjusted lifetime value (LTV). It also models the classic annual-plan question: what a discount for paying yearly costs in revenue versus what it pulls forward in cash. LTV here is contribution LTV — profit per customer, not just revenue — which is the number acquisition spending should be judged against.
The formulas
- MRR and ARR
- MRR = subscribers × monthly price (ARPU); ARR = 12 × MRR
- Average customer lifetime
- 1 ÷ monthly churn rateAt 0% churn the lifetime is effectively infinite; the tool then caps LTV at 5 years and says so.
- Customer lifetime value (contribution LTV)
- ARPU × gross margin % ÷ monthly churn rateEquivalent to monthly profit per subscriber × average lifetime in months.
- Annual-plan blend
- annual ARPU = ARPU × (1 − discount %); blended ARPU = take rate × annual ARPU + (1 − take rate) × ARPU
- Cash pulled forward by annual plans
- subscribers × take rate × annual ARPU × 12
Worked example
- Say you have 300 subscribers at $49/month, 4% monthly churn, an 80% gross margin, and a 17% annual-plan discount that 30% of subscribers take.
- MRR = 300 × $49 = $14,700; ARR = 12 × $14,700 = $176,400.
- Average lifetime = 1 ÷ 0.04 = 25 months.
- LTV = $49 × 0.80 ÷ 0.04 = $980 of contribution profit per customer over their lifetime.
- The annual plan reprices 30% of subscribers at $49 × 0.83 = $40.67, so blended ARPU is $46.50 and blended MRR is $13,950 — about $750/month of revenue given up.
- In exchange, the 90 annual subscribers pay $40.67 × 12 upfront, pulling roughly $43,924 of cash forward into today.
Rates, benchmarks & sources
- MRR = subscribers × ARPU; ARR = 12 × MRR; lifetime = 1 ÷ churn; contribution LTV = ARPU × gross margin ÷ churn — Standard SaaS/subscription metric definitions
- SMB SaaS/membership monthly-churn bands: under 2% healthy, 2–5% typical, 5–8% watch retention, above 8% leaky bucket — Rule of thumb (benchmarks.ts churnHealthy; spec §2.9 bands)
- LTV:CAC of roughly 3:1 as a healthy acquisition benchmark — Convention (benchmarks.ts ltvCacHealthy)
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- The LTV formula assumes churn is constant every month; real cohorts usually churn fastest early and settle down, so a single blended churn rate can under- or overstate LTV depending on your mix of new and mature customers.
- It ignores expansion and contraction revenue — upgrades, downgrades, and seat growth — which can matter more than churn in some businesses.
- LTV is an undiscounted sum of future profit; a dollar of contribution 25 months from now is treated the same as one today.
- The annual-plan blend assumes annual subscribers behave like monthly ones apart from price; in practice annual plans usually also reduce churn, a benefit the numbers here do not capture.
- Churn bands are rules of thumb for small-business SaaS and memberships — consumer apps, enterprise software, and gyms all have different normals.
Frequently asked questions
What is a good monthly churn rate for a small subscription business?
As a rule of thumb for SMB SaaS and memberships: under 2% per month is healthy, 2–5% is typical, 5–8% deserves attention, and above 8% is a leaky bucket — at that rate you replace most of your customer base every year just to stay flat. These are heuristics, not standards, and consumer products naturally run higher than business tools.
How is LTV calculated here, and why does gross margin matter?
LTV = ARPU × gross margin ÷ monthly churn. The gross margin term is what makes it a contribution LTV: it counts the profit a customer generates, not the revenue. At $49/month, 80% margin, and 4% churn, that is $980 — the number worth comparing to what you pay to acquire a customer. Skipping the margin term inflates LTV by 25% in this example and leads to overspending on acquisition.
Is a 17% annual discount worth it?
The trade is explicit in the numbers: at the default 30% take rate, the discount costs about $750 of MRR but pulls roughly $43,900 of cash into today. Cash-up-front funds growth without borrowing, and annual commitments typically also reduce churn — as a rule of thumb, the trade tends to favor the annual plan when your monthly churn is above about 3%. The 17% figure itself is just the popular "two months free" framing.
Why does the calculator cap LTV when churn is zero?
Because at exactly 0% churn the formula divides by zero — average lifetime becomes infinite and LTV with it, which is not a number you can plan against. Real churn is never permanently zero; it just has not shown up in your data yet. The tool caps the lifetime at 5 years and labels the result, which is a more honest planning figure for a young subscriber base.
How should I use LTV once I have it?
Its main job is disciplining acquisition spend: compare LTV to your customer acquisition cost (CAC). A common convention treats an LTV:CAC ratio of about 3:1 as healthy — enough profit per customer to cover acquisition, service, and still contribute. If your $980 LTV came with a $900 CAC you would be near break-even per customer before overhead; the LTV:CAC calculator on this site works that comparison directly.
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themoneysheet provides educational estimates, not financial, tax, or legal advice. Figures use published rates and formulas current as of the date shown, but your situation may differ. Consult a qualified professional (CPA, attorney, or licensed advisor) before making financial decisions.