Monthly & Annual Blended Churn Calculator

What is Blended Churn?

Blended churn is the combined churn rate across different subscription plans. Most SaaS businesses offer both monthly and annual plans, which typically have different churn rates.

Many SaaS companies assume churn rates on the monthly or annual plans are the same. Or they forget to convert the churn rate on the annual plan to a monthly churn rate when comparing to the monthly plan.

This monthly and annual blended churn calculator lets you input churn rates on your monthly and annual plans and calculates a blended churn rate. This blended churn rate can change over time, depending on how many annual and monthly plans your SaaS sells per month.

Annual plans often have lower churn rates because:

• Customers buy for the whole year upfront. The maxium churn rate on an annual plan is 8.25%
• The bigger upfront commitment gives the customer more time to evaluate your product and adopt it into their workflows
• Annual plans often come with a discount, which can make them more attractive to stay
• The renewal decision only happens once per year instead of once per month

How to use this calculator

1. Enter your current MRR from monthly plans
2. Enter your current MRR from annual plans
3. Input the number of customers on monthly plans
4. Input the number of customers on annual plans
5. Set the monthly churn rate for monthly plans (what % of monthly customers cancel each month)
6. Set the annual churn rate for annual plans (what % of annual customers cancel each year)

Optionally, you can enter expansion and contraction rates for each plan under the advanced options.

The calculator will show you:

• Total MRR over time
• Blended monthly churn rate
• MRR lost to churn each month

Frequently Asked Questions

Why does my blended churn rate change over time?

Your blended churn rate changes as the ratio of customers on monthly vs annual plans shifts. For example:

• If you sell more annual plans, your blended churn rate will gradually decrease since annual plans typically have lower churn
• If you stop selling annual plans but keep existing ones, your blended rate will increase as annual customers finish their terms
• If your annual churn rate is lower than monthly, the percentage of customers on annual plans will naturally increase over time, causing your blended churn rate to gradually move closer to your annual churn rate

The calculator accounts for these changes by recalculating the blended rate each month based on your current customer mix.

Should I sell more monthly or annual plans?

Both plan types have advantages:

Monthly plans:

• Lower upfront commitment from the customer
• More predictable cashflow because existing customers make a payment each month
• It's faster to implement price changes on existing customers.

Annual Plans:

• Often have lower churn rates and higher customer Lifetime Value (LTV)
• Better cashflow because the customer pays for the whole year upfront
• Customer has more time to explore your product and implement it into their workflows

Many SaaS companies offer both. Pricing pages often allow the user to choose either a monthly or annual plan. But have the annual plan selected default to encourage an annual purchase.

Can annual plans contribute more MRR if they're discounted?

SaaS companies often offer a discount, typically 2 months, on annual plans. This means the MRR of a customer on an annual plan is typically lower than the MRR of a customer on the monthly plan.

Even with the discount, it can be better for MRR overally to encourate users onto the annual plan:

1. Lower churn rates mean customers stay longer
2. Upfront cash flow can be reinvested in growth (like paid ads)

For example, a $100/month plan offered annually at $1,000 (16.7% discount) can generate more revenue if the annual plan has lower churn rate than the monthly plan.

How do I calculate MRR for an annual plan with 2 months free?

For an annual plan with 2 months free, divide the total annual revenue by 12 to get the MRR, regardless of the free months. For example:

• Annual plan price: $1,000
• Months of service: 12
• MRR calculation: $1,000 / 12 = $83.33

A customer on the monthly plan would contribute $100 of MRR. But they might be more likely to churn than someone on the annual plan.

Related Metrics

• Customer Churn Rate
• Revenue Churn Rate
• Net Revenue Retention (NRR)
• Customer Lifetime Value (LTV)