What to enter
Monthly price is what one customer pays for one month, before tax.
Enter the annual offer in the form you have it. For "2 months free", choose Months free and type 2. For an annual price above 12 monthly payments, choose Annual price.
Monthly churn is the share of your paying monthly customers who cancel each month. If 3 of 100 cancel, that's 3%. Count customers, not revenue. Your billing dashboard or the customer churn calculator can give you this. Leave it blank to see the price only.
Annual renewal rate is the share of annual customers who renew when their year is up. If 70 of 100 renew, that's 70%. It's a separate guess, not 100 minus monthly churn. No annual customers yet? Try a low and a high value. Leave it blank to stop the annual plan at month 12.
The fee presets are published US rates. Change the two fee fields to match your own account.
How to read the result
The top line is the number you didn't type, plus what the customer saves.
Annual price in monthly payments is how many monthly payments add up to the annual price. Break-even discount is the discount where the annual plan collects as much as the monthly plan, once some monthly customers cancel.
The table follows one customer on each plan. The Average collected rows are averages over many customers, so one customer's payments can differ from them. The chart shows the same totals month by month.
$20 a month, 2 months free, 3% churn, 70% renewal
Example
The annual price is $200.00, which is 16.7% off. The customer saves $40.00 a year, and exactly 10 monthly payments equal the annual price.
At 3% churn, the break-even discount is 15.0%. Your 16.7% is above it, so annual collects a little less: $200.00 by month 12, against $204.11 for monthly. By month 36, the gap is $5.98.
How do you work out an annual plan discount?
Compare the annual price with 12 monthly payments. The gap, as a share of those 12 payments, is the discount. Months free is the same gap counted in months.
Annual price, discount, and months free
Formula
Annual price = 12 × monthly price × (1 − discount)
Discount = 1 − annual price ÷ (12 × monthly price)
Months free = 12 × discount
On a $20 monthly plan, 12 payments come to $240:
| Offer | Annual price | Discount | Months free |
|---|---|---|---|
| 1 month free | $220.00 | 8.3% | 1 |
| 10% off | $216.00 | 10.0% | 1.2 |
| 15% off | $204.00 | 15.0% | 1.8 |
| 2 months free | $200.00 | 16.7% | 2 |
| 20% off | $192.00 | 20.0% | 2.4 |
| 3 months free | $180.00 | 25.0% | 3 |
Is 2 months free the same as 20% off?
No. 2 months free is 2 ÷ 12, which is 16.7% off. 20% off is the same as 2.4 months free. On a $20 plan, that's $200 a year against $192.
What are the two break-even numbers?
"Break even" can answer two different questions, so the calculator gives each its own name.
| Name | Question it answers | $20 a month, $192 a year, 3% churn |
|---|---|---|
| Annual price in monthly payments | How many monthly payments add up to the annual price? | 9.6. The 10th monthly payment passes $192. |
| Break-even discount | At what discount does annual collect as much as monthly, once some monthly customers cancel? | 15.0%. At 20% off, annual collects $12.11 less in year one. |
9.6 and 10 are both right. 9.6 is the exact count, and 10 is the first whole payment that gets there. This first number is about price only, so churn doesn't change it.
How does churn change the result?
Monthly customers can cancel any month, so the monthly plan usually collects less than 12 full payments a year. The annual plan collects its whole price at signup.
The first monthly payment comes at signup. Before each later one, your churn share of the remaining customers cancels.
Average monthly payments over n months
Formula
Average payments = 1 + (1 − churn) + (1 − churn)² + …, with n terms
Average collected = monthly price × average payments
At 3% churn, 100 monthly customers make about 1,021 payments in their first year, or 10.21 each. On a $20 plan, that's $204.11 per customer.
Higher churn raises the break-even discount. At 6% churn, the same plan averages $174.69 in year one. The $200 annual plan then collects $25.31 more, and the break-even discount is 27.2%.
Why is the annual renewal rate separate from monthly churn?
The calculator assumes annual customers decide whether to stay when their year ends, so it gives them their own number: the share who renew. Refunds that end a plan early aren't modeled.
Renewal decides months 24 and 36. Take a $20 plan with 2 months free and 3% churn. At 70% renewal, annual is $5.98 behind monthly by month 36. At 50% renewal, it's $93.98 behind, and no discount closes the gap. Annual would have to cost 5.7% more than 12 payments to match.
Is annual plan MRR the same as the upfront payment?
No. MRR (monthly recurring revenue) counts an annual plan as its price ÷ 12. A $200 annual plan adds $16.67 to MRR, even though you get $200 in cash at signup.
Stripe and Paddle both count it this way, and Stripe notes that MRR isn't cash flow. The $200 pays for a year of service you still owe. So toward an MRR goal, each annual customer counts as $16.67. The MRR goal calculator shows how many customers a goal takes.
Do processor fees make annual billing cheaper?
A little. Most processors charge a fixed fee on every charge, and an annual customer is charged once a year instead of 12 times.
Year-one fees for one customer who stays all year, 12 charges of $20 against one charge of $200, at published US rates:
| Processor rate | Monthly plan | Annual plan | Fee saved |
|---|---|---|---|
| Stripe card, 2.9% + $0.30 | $10.56 | $6.10 | $4.46 |
| Stripe card and Billing, 3.6% + $0.30 | $12.24 | $7.50 | $4.74 |
| Paddle, 5% + $0.50 | $18.00 | $10.50 | $7.50 |
| Lemon Squeezy subscription, 5.5% + $0.50 | $19.20 | $11.50 | $7.70 |
The fee saved is small next to the $40 discount, but it can tip a close result. In the usage example, adding the Stripe card fee moves month 36 from $5.98 behind to $0.20 ahead.
What happens when you refund an annual plan?
The calculator shows money before refunds. An annual refund can mean paying back months the customer prepaid, and the fee may not come back. Stripe keeps the original processing fee when you refund a card payment. Lemon Squeezy takes the refund, less its platform fee, out of your next payout. Paddle's refund page doesn't say whether its fee comes back, so check your account terms.
What annual discount should you offer?
The calculator doesn't pick one. No source shows a discount that suits every product, because it depends on your churn, renewals, and buyers.
The break-even discount shows where annual stops collecting as much as monthly for your numbers. It can't tell you whether a discount brings in more customers, or how many will pick annual. If you don't know your churn or renewal rate yet, try a few values and watch how much the answer moves.
What this calculator doesn't cover
It follows one customer on each plan. It leaves out taxes, failed payments, chargebacks, currency conversion, and the cost of running your product, so no figure here is profit.
Next steps:
- MRR calculator: add up MRR across monthly and annual plans.
- Customer lifetime value calculator: what one customer is worth after serving costs.
- Platform fees: other charges from the platforms you sell on.