Impact Pricing Blog

Q&A: Can Most Annual Subscription Revenue Really Be Booked Every Jan 1?

Question: Hi Mark, In one of the course videos for Accelerate Your Subscription Business you mention “Subscriptions make forecasting and capacity planning easy — 70% of next year’s revenue is booked on January 1”. Where did you find the stat or where did this example come from? I LOVE this quote and find myself using it a lot and wanted to understand the source. Please let me know! – N.

Answer: Hi N. First, thanks for taking the course. I’m glad it’s helpful to you.

It’s just math (and possibly a tiny bit of an exaggeration).

Calculating Your Annual Growth and Churn

You have two variables that matter when calculating your annual subscription-based revenue: annual growth and churn.

  • Churn: If you win no new customers and you don’t grow customers, meaning you have no growth at all, you can churn 5.5% per month and still have 70% of the revenue for next year.
  • Annual Growth: On the other hand, if you have no churn, and grow the company by 42% over the year, then 70% of the year’s revenue was due to retention. (1 divided by 1.42 = 70%)

Of course, the number will be somewhere in the middle. Probably something like 20% annual growth and 2.5% monthly churn.

You can use our free Subscription Growth Calculator to play with the numbers. I would recommend leaving the starting monthly revenue at $83,333. That’s $1M / year. Then adjust the inputs until Year 1 revenue shows $1.42M ($1M is 70% of $1.42M).

The bottom line is that in a subscription business you certainly want to grow your revenue, but if you treat your current customers right they are already next year’s revenue. That’s way easier than trying to win new business.

Tags: ask a pricing expert, subscription pricing

Related Posts


Pricing Best Practices:
How Private Equity Can Drive Value Without Compromising Relationships

Don't miss out on this opportunity to enhance your pricing approach and drive increased value.

Our Speakers

Mark Stiving, Ph.D.

CEO at Impact Pricing

Alexis Underwood

Managing Director at Wynnchurch Capital, L.P.

Stephen Plume

Managing Director of
The Entrepreneurs' Fund