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Annual vs Monthly Pricing Calculator

Set your annual plan discount with confidence: see the annual price, what customers save, and the discount at which annual earns you as much as monthly plans that churn.

Your numbers

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%
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Share of monthly-plan customers who cancel each month.

Annual plan price

$192.00

Break-even annual discount

15.0%

Annual plan, per month
$16.00
Customer saves per year
$48.00
Expected first-year revenue from a monthly customer
$204.11
Months a monthly customer must stay to pay the annual price
9.6 months
The math behind it

  1. Annual price

    $20.00 × 12 × (1 − 20%)equals$192.00

  2. Monthly plan, year 1

    $20.00 × (1 − (1 − 3%)¹²) ÷ 3%equals$204.11

  3. Break-even discount

    1 − $204.11 ÷ $240.00equals15%

An annual discount trades some revenue for cash up front and customers who can't churn for a year. The right discount depends on your churn: if monthly customers leave quickly, you can afford a bigger discount, because many of them would never have paid for twelve months anyway.

How it works

Annual price = monthly price × 12 × (1 − discount). The customer saves the discount on a full year of monthly payments.

A monthly customer who churns at rate c pays for month 1, then stays each following month with probability (1 − c). Expected first-year revenue is monthly price × (1 − (1 − c)^12) ÷ c.

The break-even discount is where the annual price equals that expected revenue: 1 − expected revenue ÷ (12 × monthly price). A discount below it earns more per customer than monthly billing, before counting the value of cash up front.

A worked example

A $20 plan with a 20% annual discount costs $192 a year, or $16 a month, saving the customer $48. With 3% monthly churn, a monthly customer pays $204.11 on average in the first year, so the break-even discount is 1 − 204.11 ÷ 240 = 15.0%. At 20%, annual earns $12.11 less per customer but collects it all on day one.

Questions people ask

What annual discount is typical?

Many SaaS companies offer 15% to 20%, often shown as "2 months free" (16.7%). Higher discounts are common when churn on monthly plans is high or when cash up front matters for the business.

Why offer annual plans if they can earn less?

Cash up front funds growth, annual customers churn less at renewal, and a year of use gives the product time to become a habit. Those benefits often outweigh a small revenue gap.

Does this include renewals?

No. It compares the first year only. If annual customers renew at a higher rate than monthly customers survive, the long-term case for annual plans is stronger than this shows.

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