Paddle Billing
ProfitWell Metrics
ProfitWell has partnered with ReCharge 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 | ReCharge |
Cancellations and Churn | When a customer cancels their subscription, we recognize the MRR of a customer until the end of their billing cycle. | A customer is considered to have churned the day after their subscription is canceled. For calculation purposes, the customer churn is recorded the day after the customer is inactive. That means if a customer canceled on July 5th at 11:00 am, they would be recorded in our database as having churned on July 6th. |
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. | Discounts and credits are factored into 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. | Refunds are not factored into MRR. |
Subscriptions on hold | When a customer has a subscription that is on hold, we downgrade them to $0 in MRR. | Subscriptions put on hold will downgrade MRR to 0, so "total sales" will lower overall. |
Reactivations | If a customer churns and comes back within any period in time, they will be marked as a reactivation. | A customer can come back at any point and be considered a reactivation, as long as they are coming back for the same product. |
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. | LTV = combined average of everyone's lifetime spent in a given period. |
Free plans ($0 subscriptions) | We bundle free plans into trials. | It is up to the merchant whether or not free plans are considered 'active customers'. |
Classifying customers | A customer, by our definition, must be actively paying you for your product or service on a recurring basis. | It is up to the merchant whether or not free plans are considered 'active 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!