Most subscription businesses raise prices less often than they should, because the fear of losing customers is vivid and the upside is abstract. This calculator puts both on the same scale: how much more you earn from the customers who stay, against what you lose from the ones who leave, and the exact share of customers you could lose before the rise stops paying off.
How it works
Monthly revenue today is customers × current price. After the rise, it is the customers who stay × the new price, where the customers who stay are your current customers minus the extra share you expect to lose.
The break-even loss is the share of customers you could lose and still earn the same as today. Revenue is unchanged when (1 − loss) × new price = old price, so the break-even loss is 1 − old price ÷ new price. A rise from $29 to $35 can lose up to 17.1% of customers before revenue falls.
If your expected loss is well below the break-even figure, the rise increases revenue even if you are somewhat wrong about churn. If the two are close, a small misjudgment turns the rise into a loss, so test on new customers first.
Only extra churn caused by the rise belongs in the loss field. Customers who would have cancelled anyway leave at either price, so they don't count against the increase.
A worked example
500 customers paying $29 a month bring in $14,500. Raising the price to $35 and losing 5% of customers (25 people) leaves 475 customers paying $35: $16,625 a month. Revenue rises by $2,125 a month, or 14.7%, which is $25,500 a year. The break-even loss is 17.1%, so the rise still pays off even if the actual loss is three times the estimate.
Questions people ask
How many customers can I lose from a price increase?
Up to 1 − old price ÷ new price before revenue falls. A 20% rise, such as $50 to $60, can lose up to 16.7% of customers and still break even.
How much churn does a price increase usually cause?
It varies with how much value customers get and how the change is communicated. Moderate rises with clear notice often cause a few percent of extra cancellations. Your own cancellation data after past changes is the best guide.
Should existing customers keep the old price?
Grandfathering existing customers removes most of the churn risk but delays the revenue gain. A common middle path is to apply the new price to new customers now and to existing customers at their next renewal, with notice.
Does a price increase affect new customer sign-ups?
It can lower conversion from trial or visit to paid. This calculator covers your existing base; check the effect on new customers with the Trial to Paid Conversion Calculator using a lower conversion rate.
Is revenue the right measure, or profit?
Profit usually improves even more than revenue, because customers who leave also stop costing you support and hosting, while the ones who stay pay more for the same service.