SaaS Subscription Pricing Calculator
Compare monthly vs annual subscription pricing strategies.
See how discount rates affect total revenue, MRR, ARR, and customer lifetime value over time.
Subscription pricing models structure recurring revenue to maximize long-term customer value, minimize churn, and create predictable cash flow. Pricing strategy directly determines LTV, gross margin, and the ability to scale.
Key revenue formulas:
Monthly Recurring Revenue (MRR): MRR = Σ (Active Subscribers × Monthly Price per Tier)
Annual Recurring Revenue (ARR): ARR = MRR × 12
Average Revenue Per User (ARPU): ARPU = Total MRR / Total Active Subscribers
Gross Margin: Gross Margin % = (Revenue − COGS) / Revenue × 100% For SaaS, COGS includes hosting, payment processing, support. Target gross margin: 70–85%.
Pricing model options and formulas:
Per-seat pricing: Revenue = Seats × Price per seat Usage-based: Revenue = Units consumed × Price per unit Tiered: Revenue = Σ (subscribers per tier × tier price) Freemium conversion: Revenue = Free users × Conversion rate × Paid ARPU
Optimal price point estimate (van Westendorp method): Survey customers with 4 questions (too cheap, cheap, expensive, too expensive) to find the Acceptable Price Range — the overlap between “not too cheap” and “not too expensive” responses.
Price elasticity: Elasticity = % Change in Quantity / % Change in Price If elasticity > 1: reducing price increases revenue (elastic market) If elasticity < 1: price increases still grow revenue (inelastic market)
Worked example: SaaS tool with 3 tiers: Basic $19/mo (600 users), Pro $49/mo (300 users), Enterprise $149/mo (50 users). MRR = (600 × $19) + (300 × $49) + (50 × $149) = $11,400 + $14,700 + $7,450 = $33,550 ARPU = $33,550 / 950 = $35.32/user/month ARR = $33,550 × 12 = $402,600
Annual plan discount economics: Offering 2 months free (16.7% discount) on annual plans is standard. The immediate cash collection reduces churn risk by 50–60% and improves cash flow for reinvestment.