Annual Discount Calculator
Most companies pick annual discounts by gut feel — 15%, 20%, two months free. This calculator uses your actual retention data to find the discount that maximizes revenue without leaving money on the table.
Recommended Annual Price
$232
$19.33/mo equivalent
Recommended Discount
33%
off monthly price
Monthly Subscriber LTV
$116
breakeven floor
How this works:
Your avg monthly subscriber pays $29/mo for 4 months = $116 LTV.
Any annual price above $116 earns more than the average monthly subscriber.
The recommended price splits the difference — attractive enough to convert, profitable enough to be worth it.
The Breakeven Method, Explained
The core insight: your annual plan only needs to earn more than the average monthly subscriber would have paid before churning. Anything above that is incremental revenue.
Monthly Subscriber LTV = Monthly Price × Avg Lifetime (months)
Annual Price Floor = Monthly Subscriber LTV (breakeven)
Recommended Annual Price = (LTV + Full Annual Price) / 2
The recommended price splits the difference between your breakeven floor (monthly LTV) and the full undiscounted annual price. This gives subscribers a meaningful discount while capturing significantly more revenue than the average monthly subscriber generates.
Example: If your monthly plan is $29/mo and the average subscriber stays 4 months, their LTV is $116. Any annual price above $116 earns more than your typical monthly subscriber. The calculator recommends $232 — a 33% discount off the $348 annual sticker price, but still double the revenue of your average monthly subscriber.
When to Adjust Your Discount
The breakeven method gives you a starting point, but you may want to adjust based on your goals:
- Prioritizing growth? Lean closer to the breakeven floor. A bigger discount drives more annual conversions, which reduces churn and improves cash flow predictability.
- Prioritizing revenue per user? Lean closer to the full annual price. A smaller discount captures more per subscriber but may convert fewer users to annual.
- High churn (6+ months avg lifetime)? Be more aggressive with the discount — locking users into annual plans is especially valuable when monthly retention is low.
- Low churn (10+ months avg lifetime)? You can afford a smaller discount since monthly subscribers already stick around.
For a deeper dive into annual vs. monthly pricing strategy, read our complete guide to annual vs. monthly pricing.
Get the playbook every Thursday
Weekly strategies for subscription businesses. Real companies, real numbers, tactics you can steal. From the operator who grew Codecademy from $10M to $50M ARR.