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Methodology

Subscription Pricing Tier Planner methodology

Compare two fixed-label subscription tiers on accounts, price, usage-linked service cost, support cost and contribution rank.
Duc Nguyen X.By Duc Nguyen X.· Founder, Margin101Last reviewed: View update historyMethodology

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

Starter revenue
starterRevenue = Starter accounts × Starter price

Where

starterAccounts
Starter accounts (whole or operational units)Source: Business record
starterRevenue
Starter revenue (money)Source: Calculated output
Starter service cost
starterServiceCost = Starter accounts × (usage × unit cost + support) + fixed cost

Where

starterAccounts
Starter accounts (whole or operational units)Source: Business record
starterCostPerUsageUnit
Starter cost per usage unit (currency units on one consistent basis)Source: Business record
starterServiceCost
Starter service cost (money)Source: Calculated output
Starter contribution
starterContribution = Starter revenue − Starter service cost

Where

starterRevenue
Starter revenue (money)Source: Calculated output
starterServiceCost
Starter service cost (money)Source: Calculated output
starterContribution
Starter contribution (money)Source: Calculated output
Starter contribution margin
starterContributionMargin = Starter contribution ÷ Starter revenue

Where

starterRevenue
Starter revenue (money)Source: Calculated output
starterContribution
Starter contribution (money)Source: Calculated output
starterContributionMargin
Starter contribution margin (percent)Source: Calculated output
Starter rank
starterRank = raw contribution rank

Where

starterContribution
Starter contribution (money)Source: Calculated output
starterRank
Starter rank (rank)Source: Calculated output
Pro revenue
proRevenue = Pro accounts × Pro price

Where

proAccounts
Pro accounts (whole or operational units)Source: Business record
proRevenue
Pro revenue (money)Source: Calculated output
Pro service cost
proServiceCost = Pro accounts × (usage × unit cost + support) + fixed cost

Where

proAccounts
Pro accounts (whole or operational units)Source: Business record
proCostPerUsageUnit
Pro cost per usage unit (currency units on one consistent basis)Source: Business record
proServiceCost
Pro service cost (money)Source: Calculated output
Pro contribution
proContribution = Pro revenue − Pro service cost

Where

proRevenue
Pro revenue (money)Source: Calculated output
proServiceCost
Pro service cost (money)Source: Calculated output
proContribution
Pro contribution (money)Source: Calculated output
Pro contribution margin
proContributionMargin = Pro contribution ÷ Pro revenue

Where

proRevenue
Pro revenue (money)Source: Calculated output
proContribution
Pro contribution (money)Source: Calculated output
proContributionMargin
Pro contribution margin (percent)Source: Calculated output
Pro rank
proRank = raw contribution rank

Where

proContribution
Pro contribution (money)Source: Calculated output
proRank
Pro rank (rank)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.

Starter revenue
2,000.00 currency units
Starter service cost
800.00 currency units
Starter contribution
1,200.00 currency units
Starter contribution margin
60%
Starter rank
#2
Pro revenue
2,500.00 currency units
Pro service cost
900.00 currency units
Pro contribution
1,600.00 currency units
Pro contribution margin
64%
Pro rank
#1

The exact engine-derived outputs are shown in the labelled rows below.

Interpretation

Use raw contribution rank to compare the entered tier scenarios, not as evidence of customer demand or migration behaviour.

3. Validation and boundary checks

  • Both fixed tier labels map to unique engine IDs.
  • Account counts must be finite non-negative whole numbers; all other economics must be finite and non-negative.
  • Revenue, service cost and contribution reconcile independently for each tier.
  • Rank uses raw contribution before display rounding.

4. Assumptions and source classification

  • Starter and Pro are stable comparison labels, while all account, price, usage and cost values are user records.
  • Demand and usage are scenarios, not forecasts.

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 fixed two-tier comparison does not forecast migration, demand or usage.
  • 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

  1. : 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.

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