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ProfitWell vs. Recurly

ProfitWell has partnered with Recurly to provide its users with deep insights into their financial metrics. That said, there are few differences in the methodologies around calculating these metrics.

Topic

ProfitWell

Recurly

Cancellations and Churn

When a customer cancels their subscription, we recognize the MRR of a customer until the end of their billing cycle.

More on that here.

Churned MRR will not show up until the current month is complete.

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.

Churned MRR will not show up until the current month is complete.

Discounts and Credits

We always subtract discounts and credits before calculating MRR, regardless of frequency.

More on that here.

You have the option to either include or remove discounts from your MRR, however Recurly defaults to including coupon discounts in MRR.

Refunds

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.

More on that here.

All invoiced credits or refunds with a start and end date are included in MRR. For example, Company X might refund John Smith on a recurring charge. This will show on an invoice as a charge with a start and end date. That refund (a negative recurring charge) will be included in Company X’s MRR value.

Subscriptions on hold

When a customer has a subscription that is on hold, we downgrade them to $0 in MRR.

When subscribers request to pause their subscription, the subscription remains active until they reach the end of their current billing period, at which point the subscription will move into a paused state—MRR will be $0.

Reactivations

If a customer churns and comes back within any period in time, they will be marked as a reactivation.

If a customer churns and then comes back at least a month later, then they are considered a reactivation.

Metered billing

We roll all recurring metered billing into MRR.

Usage charges are not included in MRR.

Calculating LTV

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.

More on that here.

LTV = ARPS (1 + d) / d + Churn Rate

  • ARPS = Average revenue per subscriber (MRR at the end of the month / # of active subscribers at the end of the month). A subscriber is anyone with at least 1 subscription.
  • Churn rate = # of subscribers who churned in the previous month / number of active subscribers at the beginning of the previous month
  • d = discount rate

Free plans ($0 subscriptions)

We bundle free plans into trials.

Free plans are considered trials.

Classifying customers

A customer, by our definition, must be actively paying you for your product or service on a recurring basis.

More on that here.

A subscriber must have at least one active, canceled or paused subscription. This includes subscribers with a subscription in trial.

A customer is defined as any account that has contributed revenue during the selected time range. This could be a subscriber but does not have to be if a business accepts one time transactions. This does not include free trial subscribers.

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!

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