Paddle Billing
ProfitWell Metrics
ProfitWell has partnered with Chargebee 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 | Chargebee |
Cancellations and Churn | When a customer cancels their subscription, we recognize the MRR of a customer until the end of their billing cycle. | There are a few different ways a subscription can be cancelled: Cancel immediately: Cancels the subscription immediately. Cancel at end of term: Waits till the end of the term and then cancels (changes the subscription status to non-renewing). Cancel on a specific date: Waits till the scheduled date and then cancels. You can set the precise date and 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. | MRR excludes non-recurring coupons. The upcoming renewal amount is used to calculate 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 do not affect MRR in Chargebee. |
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 comes back within any period in time, they will be marked as a reactivation. |
Metered billing | We roll all recurring metered billing into MRR. | It's a separate category of revenue, and 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. | LTV = ARPU/Churn Rate |
Free plans ($0 subscriptions) | We bundle free plans into trials. | Users on free plans/$0 subscription plans are considered trialling customers. |
Classifying customers | 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 who are fully discounted/credited are considered customers. Users who are trialing 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!