Compares an annual plan with monthly billing, shows how many customers a price increase can lose before it stops paying, and how many a discount must win to earn back its cost. For founders and marketers deciding on pricing.
How to use it
Bring your current monthly price and margin, then add whichever change you are considering. The result updates as you type, and nothing leaves your browser.
- Pick your currency, then enter the monthly price one customer pays and your gross margin on it.
- Optionally enter the discount an annual plan would give against paying twelve months.
- Optionally enter a price increase, or a discount, as a percentage of today's price.
- Read each scenario and open Show the math to see the formulas behind the numbers.
How Reavlo tests this
The calculator is plain arithmetic, run in your browser. It compares one customer's price and cost, so the break-even figures hold for any number of customers. Every step is listed under Show the math.
- Cost per customer = monthly price × (1 − gross margin).
- Annual price = monthly price × 12 × (1 − annual discount). Per month on annual = annual price ÷ 12. Saved = monthly price × 12 − annual price. Free months = 12 × annual discount.
- New price after an increase = monthly price × (1 + increase). Churn that cancels it, by revenue = increase ÷ (1 + increase). Churn that cancels it, by profit = increase ÷ (gross margin + increase), because the cost per customer stays the same while the price rises.
- Discounted price = monthly price × (1 − discount). Extra customers needed to keep revenue = discount ÷ (1 − discount). Extra customers needed to keep profit = discount ÷ (gross margin − discount). When the discount is as large as the margin, each customer brings no profit and no volume makes it up, so the calculator says so instead of showing a number.
Amounts are in major units of the currency you pick (ISO 4217); rates are stored as 0 to 1 and shown as percentages. Discounts are limited to 99%, and a margin of 0 is not accepted.
Limits. The calculator assumes the cost of serving a customer stays the same when the price changes, that customers lost or won are like the customers you have, and that there is no effect on churn of existing customers beyond the loss you test. It does not predict how many customers you will actually lose or win: it shows the line you must stay on the right side of.
Questions
How many customers can I lose from a price increase?
It depends on your margin. With a 50% margin, a 10% increase is cancelled in profit by losing about 17% of customers; the calculator gives the exact figure for yours and, separately, the figure for revenue.
Why is the profit figure higher than the revenue figure?
A customer you lose also takes their cost away. Losing one customer costs you less profit than revenue, so you can lose more customers before profit falls than before revenue falls.
How many extra customers does a discount need to win?
The discount divided by what is left of the margin after it. A 20% discount on a 50% margin needs about 67% more customers just to earn the same profit.
How should I set an annual plan discount?
Compare the free months it gives with the cash you get upfront and the churn you avoid over the year. The calculator shows the first; the other two are specific to your business.