How it's calculated
A price rise brings in more from every customer who stays but loses the customers it drives away. The calculator compares recurring revenue before and after, and works out the break-even: the share of customers you could lose before the increase stops paying for itself.
Recurring revenue here means MRR as public SaaS companies define it: the monthly run-rate of committed subscription revenue, multiplied by 12 for ARR.SEC (EDGAR)
The formula
- MRR before = customers × price
- MRR after = customers × (1 − extra churn) × price × (1 + increase)
- Break-even extra churn = increase ÷ (1 + increase)
The break-even comes from setting MRR after equal to MRR before: (1 − c) × (1 + i) = 1, so c = i ÷ (1 + i).
Worked example
Raising a $50 plan by 10% for 1,000 customers and losing 5% of them takes MRR to $52,250, a change of $2,250. You could lose up to 9.091% of customers before the rise cost revenue.
| Line | Before | After |
|---|---|---|
| Customers | 1,000 | 950 |
| Price per month | $50.00 | $55.00 |
| MRR | $50,000 | $52,250 |
| ARR | $600,000 | $627,000 |
A 20% rise with the same 5% loss adds $7,000 a month; its break-even churn is 16.667%.
Assumptions and limitations
- Immediate effect only. Customers who stay pay the higher price for the rest of their lifetime, and those who leave also take future upgrades with them.
- Everyone moves to the new price. Grandfathering existing customers delays both the gain and the churn.
- New-customer conversion may also change; model that with the trial conversion calculator.