Methodology
Subscription Churn Impact Planner methodology
Educational only: Business decision support, not accounting, tax or legal advice.
Privacy: Calculations run locally; Margin101 does not receive your commercial inputs.
Update policy: Reviewed when formulas or official dependencies change.
Scope: Market-neutral small-business planning using your own assumptions.
1. Formulas and units
churnedAccounts = opening accounts × logo churn rateWhere
- openingAccounts
- Opening accounts (whole accounts)Source: Business record
- logoChurnRate
- Logo churn rate (decimal rate)Source: Business record
- churnedAccounts
- Churned accounts (units)Source: Calculated output
churnedMrr = opening MRR × revenue churn rateWhere
- openingMrr
- Opening MRR (currency units on one consistent period basis)Source: Business record
- revenueChurnRate
- Revenue churn rate (decimal rate)Source: Business record
- churnedMrr
- Churned MRR (money)Source: Calculated output
lostAnnualContribution = churned MRR × 12 × contribution margin rateWhere
- contributionMarginRate
- Contribution margin rate (decimal rate)Source: Business record
- churnedMrr
- Churned MRR (money)Source: Calculated output
- lostAnnualContribution
- Lost annualised contribution run-rate (money)Source: Calculated output
replacementAcquisitionCost = churned accounts × replacement CACWhere
- churnedAccounts
- Churned accounts (units)Source: Calculated output
- replacementAcquisitionCost
- Replacement acquisition cost (money)Source: Calculated output
totalAnnualImpact = lost annual contribution + replacement acquisition costWhere
- lostAnnualContribution
- Lost annualised contribution run-rate (money)Source: Calculated output
- replacementAcquisitionCost
- Replacement acquisition cost (money)Source: Calculated output
- totalAnnualImpact
- Total annualised impact run-rate (money)Source: Calculated output
Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Rates, margins, utilisation and buffers are entered as percentages and converted to decimal values for calculation.
2. Worked example
Input assumptions
Worked values below come from the same registered engine and visible default assumptions.
Calculation and outputs
Example
Worked values below come from the same registered engine and visible default assumptions.
- Churned accounts
- 10
- Churned MRR
- 800.00 currency units
- Lost annualised contribution run-rate
- 6,720.00 currency units
- Replacement acquisition cost
- 5,000.00 currency units
- Total annualised impact run-rate
- 11,720.00 currency units
The exact engine-derived outputs are shown in the labelled rows below.
Interpretation
Use the two churn measures separately: account loss drives replacement count while revenue loss drives contribution impact.
Scenario study: finite cohort recovery
Bound recovery to a named cohort and horizon
Compare cumulative contribution with the declared acquisition or onboarding amount over a finite cohort horizon. Do not infer an infinite customer lifetime.
Input basis
- Fictional acquired cohort: 100 subscribers observed for six cycles.
- Recovery amount: 4,800 CU; contribution: 18 CU per active subscriber-cycle.
- Active subscribers by cycle: 100, 88, 80, 74, 69 and 65.
| Cycle | Active × 18 CU | Cycle contribution | Cumulative contribution |
|---|---|---|---|
| 1 | 100 × 18 | 1,800 CU | 1,800 CU |
| 2 | 88 × 18 | 1,584 CU | 3,384 CU |
| 3 | 80 × 18 | 1,440 CU | 4,824 CU — recovery crossed |
| 4 | 74 × 18 | 1,332 CU | 6,156 CU |
| 5 | 69 × 18 | 1,242 CU | 7,398 CU |
| 6 | 65 × 18 | 1,170 CU | 8,568 CU |
Interpretation
This scenario crosses the 4,800 CU recovery amount during cycle 3. It is a finite user scenario, not a prediction of churn, retention or causal payback.
Boundaries and next step
- Rebuild the comparison when the churn convention, refund treatment, service cost, attribution or horizon changes.
- Use the annual/monthly or subscription-box owner only when that distinct business model matches the decision.
Continue with Subscription Churn Impact Planner or subscription churn measurement guide.
3. Validation and boundary checks
- Opening accounts must be a finite non-negative whole number; monetary inputs must be finite and non-negative.
- Logo churn, revenue churn and contribution margin rates must remain between 0% and 100%.
- Lost annualised contribution run-rate and replacement acquisition cost must reconcile to total annualised impact run-rate.
- Logo and revenue churn remain separate even when their entered percentages happen to match.
4. Assumptions and source classification
- Logo churn and revenue churn are independently entered scenario assumptions.
- Contribution margin and replacement CAC use the same currency and cohort basis.
- Multiplying churned MRR by 12 creates an annualised run-rate; it does not model replacement timing or realised revenue loss month by month.
- No provider benchmark, market default, country rule or policy constant is embedded.
This planner has no current policy-data dependency. Its commercial assumptions are user supplied. Registered family-level regression suites exercise the shared business-logic engine and worked-result reconciliation.
5. Limitations
- The workflow does not claim that every churned account will or should be replaced.
- It does not model timing, capacity or causal churn drivers.
- It does not replace financial, accounting, tax or legal advice.
This is educational decision support, not tax, accounting, legal or financial advice. Check the treatment of your actual transactions under the rules that apply to your business and seek qualified advice where appropriate.
6. Update and evidence policy
Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this planner. Commercial inputs remain user-supplied because they vary by business and contract.
Change history
- : Initial public release of the planner and methodology after pre-launch calculation, content, source and interaction review.
Related reading
Guides to interpret the decision and its assumptions.
- SaaS Unit Economics: Contribution, CAC, Churn and Cash
Connect contribution, acquisition cost, retention and cash timing while keeping cohort and horizon boundaries explicit.
Read guide - How to Review Subscription Churn by Cohort
Define a comparable subscriber cohort, reconcile churn events and test one measurable retention change without assuming causation.
Read guide - Churn Reduction vs More Acquisition
Compare bounded retention and acquisition interventions on the same cohort, contribution and evaluation horizon.
Read guide