ProfitWell has partnered with Chargify to provide its users with deep insights into their financial metrics. That said, there are few differences in the methodologies around calculating these metrics.
Cancellations and Churn
When a customer cancels their subscription, we recognize the MRR of a customer until the end of their billing cycle.
The MRR of a subscription is removed at the time of cancellation.
New business and Churn in the same month
When a customer signs up and churns in the same calendar month, we ignore them from your metrics entirely to not inflate new + churn.
This revenue is factored into both new MRR and Churn.
Discounts and Credits
We always subtract discounts and credits before calculating MRR, regardless of frequency.
Chargify also subtracts discounts and credits before calculating MRR, regardless of frequency.
Generally speaking, we ignore refunds.
With the purpose of MRR being a momentum metric, we're focused on events that are recurring. If you offer a customer a one-month full refund, we don't believe that should be classified as churn, and reactivation the next month—or, in the case of a partial refund: a downgrade, and upgrade the next month. It doesn't seem actionable to include these scenarios into your metrics.
Refunds do not affect MRR in Chargify.
Subscriptions on hold
When a customer has a subscription that is on hold, we downgrade them to $0 in MRR.
The subscription continues to impact MRR as is.
If a customer churns and comes back within any period in time, they will be marked as a reactivation.
If a customer churns and comes back within 90 days, it will count as a reactivation. After that, it's new.
We roll all recurring metered billing into MRR.
It's a separate category of revenue, and not included in MRR.
Our calculation is roughly ARPU/(1-Retention), but we also apply a smart smoothing algorithm on top of this.
In other words, we take a look at more than the current month ARPU and churn rate: we take a look at the whole ARPU (typically stable) and churn (usually volatile) trends, apply some magic (math, really!), and go from there.
We also think that upgrades, reactivations, and downgrades should also meaningfully impact your LTV, so instead of simply taking churn, we take 1-Retention as the denominator.
LTV = (P * M)*[1/(1-r)]
Customer lifetime value is provided assuming a constant value for margin (if you enter it at the left) and retention rate (as estimated that month). This calculation is adapted form Harvard’s “Customer Profitability and Lifetime Value”
Free plans ($0 subscriptions)
We bundle free plans into trials.
Free plans/$0 subscription plans are listed as active customers.
Only up to 10k free plans can be stored in Chargify.
A customer, by our definition, must be actively paying you for your product or service on a recurring basis.
Users charged through one-off payments are considered customers.
Users on free plans/$0 subscription plans are considered customers.
Users who are fully discounted/credited are considered customers.
Users who have a subscription starting in the future are listed as customers.
Accuracy is, has been, and will always be our top priority. If you have any questions, please reach out to us with an example of a customer that is either missing or reflecting inaccurate subscription activity within ProfitWell. We're happy to help get to the bottom of any discrepancies!