Getting a clear picture of the long-term revenue trajectory of your subscription app business has always been tricky. Combining all of the factors that can influence recurring revenue, even over the span of a couple years, takes some careful analysis.

But now, Braavo and RevenueCat have partnered to launch a revenue calculator designed to help founders calculate future revenues and project annual subscription performance up to four years out.

Using this calculator, founders can see how certain variables, like subscription price, growth rate, and retention, will impact scalability and long-term growth. The tool can even show you how well you’re retaining customers and pinpoint where your current strategies may need some work in order to build sustained success.

Revenue calculator walkthrough

This tool’s potential is multifaceted, but before we begin to unpack the stories the calculator can help tell about your growth trajectory, let’s nail down the basics by defining each input function on the calculator. Open up the revenue calculator and follow along!

1. Annual subscription price

Enter the price your subscribers pay on an annual basis.

2. New subscribers per month

Enter the raw number of new subscribers you get on a monthly basis before factoring in the monthly growth rate.

3. Subscriber growth rate per month

Enter the percentage by which your new subscribers per month increases on a month-to-month basis. If your subscriber growth is flat — i.e. you gain the same number of new subscribers every month — this rate would be 0%.

4. Yearly retention rates

Enter the percentage of subscribers who renew their subscription after their first year. You may need to take a look at your App Store performance metrics to determine this retention rate, or use another tool, like Braavo Analytics or Revenue Cat.

For your second year, enter the percentage of subscribers who renew their subscription after their second year. This data appears as the second sloping wave.

For your third year, enter the percentage of subscribers who renew their subscription after their third year. This is represented by the third and final slope that’s mostly visible in the bottom right of the graph.

This data visualization indicates the difference in remaining and lost subscribers at each one-year mark, starting from when those subscribers first signed on. If you don’t have these numbers handy, try entering aspirational numbers and consider what an ideal scenario might indicate for your growth potential in the near future.

Next, let’s look at the numbers you’ll see in the hover state on the graph itself after inputting the above functions.

1. Annual recurring revenue

Depending on where you hover, annual recurring revenue (ARR) indicates your projected revenue for the 12 months up to that point.

2. New revenue

This metric indicates how much new revenue has been added to your total ARR during the specific month where you’re hovering. This is calculated by finding the difference between that month’s subscriptions and the previous month’s subscriptions, and then multiplying that number by your annual subscription price.

3.Renewal revenue

This metric indicates how much new revenue you’re earning specifically from renewed subscriptions in a given month. This number is flat until you reach year two, at which time the number is calculated as follows for each year:

• Y2 renewal revenue = New revenue amount from the same period previous year × first-year retention rate
• Y3 renewal revenue = New revenue + renewal revenue amount from the same period previous year × second year retention rate
• Y4 renewal revenue = New revenue + renewal revenue amount from the same period previous year × third-year retention rate

4. Subscriptions

This is the total amount of subscribers you have at the hover point.

Planning revenue streams and hitting goals

Use this revenue calculator to see if your projections align with your goals and where you want to be within the next few years. This could also help you strategically plan how you’ll invest in product or growth when seeking outside investment, letting you show this chart as a proof point when acquiring funding.

If you want to use this calculator to provide a benchmark for your company’s growth, try using an industry average as your input. For example, data from RevenueCat suggests upper quartile performers have a 43% first-year retention rate on average. Here’s one example of how that might look:

• Annual subscription price: $100
• New subscribers per month: 100
• Subscriber growth rate per month: 3%
• First-year retention rate: 43% (based on RevenueCat data for upper quartile performers)
• Second-year retention rate: 43%
• Third-year retention rate: 43%

The following projections show where this service should expect to stand financially by the end of four years:

In this scenario, we estimated that retention rates would not change year to year — though that’s rarely the case. For now, we can see that if retention rates hold strong, total revenues will exceed $500,000 in just four years.

Let’s also consider a scenario where retention rates dip in years two and three. The lower rates show steeper drops in user count and revenue after each year. In this instance, early investments in growth might not be working as effectively as they did in year one, potentially indicating to you that your strategies need a tune up.

For founders looking to check themselves over a given period, they’ll be able to flag when revenue is lagging against this trajectory, particularly if retention rates become less solid and cause this exponentially shaped graph to flatten out.

Gauging if current tactics are cutting it

This calculator shows how your current revenue and subscription metrics stack up, indicating whether or not your active strategies are working.

Depending on performance in individual areas, you can determine whether you need to focus on new user acquisition, retention, or some combination of the two. Play around with the inputs and see how the graph shape and the revenue metrics listed at the top can alter over time, depending on how well your business performs.

If your subscriber growth rate is low or zero, you’ll see a typical staircase graph with little upward curve.

This may indicate that you’re not reinvesting enough in acquisition efforts, causing flat growth rates. Set goals to consistently outperform previous months so you’ll increase total revenue over time while also demonstrating your high-growth potential to future investors.

If your retention rates are low — and drop year to year — the graph will show little return on recurring revenue no matter the hover point.

Poor retention means that long-term sustainability could be challenging, indicating that you might need to put more resources behind your product’s stickiness and subscriber retention efforts. Better retention means you have a higher growth ceiling and much higher potential to drive long-term success.

Knowing if your business is sustainable

When considering the long-term viability of your annual subscriptions, make sure to take the time to measure and reflect on the sustainability of your service by accounting for retention rates, growth rates, and revenue targets.

Using this calculator, you can get a solid baseline by measuring how your current annual retention rate would stack up over a four-year period. If this number, coupled with your monthly subscription growth rate, is not showing strong returns, you might need to do more to drive retention. As previously mentioned, low retention rates could translate to lower revenue over time, putting more pressure on top of funnel efforts and user acquisition.

Luckily, there are many strategies you can use to turn these numbers around. Certain engagement and retention-driving strategies could boost those metrics so your annual growth rate would not just hold each year, but even grow — all of which you could test view in the calculator.

Some potential retention tactics include:

• Regular feature updates that excite subscribers
  As you grow over time, customers will expect your subscription service to evolve and offer more than its initial launch provided. Giving new, improved features that enhance the user experience will drive loyalty even further and keep your subscribers from leaving.
• Retention offers to win back users
  If long time subscribers have churned, don’t let them slip away. Explore offering a win-back promotion at a discount to entice them to come back.
• Test how subscription durations impact retention
  Explore how offering different subscription durations (weekly, monthly, annual) and their relative price points impact retention and the LTV of your customers. Running A/B tests and observing how your subscription tiers perform over time, and not just the initial conversion,can help you ensure you’re pricing and bundling your offers in a way that encourages users to become long-time subscribers.
• Test promotional pricing
  Some price-sensitive users might just need the right promotional offer to get them to convert. Providing offers to user cohorts based on their stickiness may help improve long-term retention.

Use the revenue calculator to see the amount you’d be able to reinvest in these retention-driving strategies, and then how much more you could potentially earn if each of these strategies boosted yearly retention by even 5%.
📚 Subscription pricing resources:

• 3 Subscription Pricing Best Practices
• 3 Important Things To Think About When Setting a Price for Your Subscription App

Finding the metrics that need work

Our revenue calculator incorporates several inputs and real-time measurements that grant insight into where your business could stand over the next four years. With plenty to choose from and play with, take some time to adjust each measurement one by one and see how your current projections could be amplified by finding the metrics that need the most work.

Start with an easy one: annual revenue. Enter your estimated inputs, and review your revenue for the first few years. Reflecting on what the next four years would look like if current trends continue, ask yourself some questions like:

• Do I like those measurements?
• Are those strong revenue numbers for my business to continue growing?
• Am I doing everything I can to make these numbers as resilient as they can be?
• Am I over or underestimating how well I can perform during the next four years?

Try adjusting one metric at a time, and take note of what changes positively while being mindful of what’s realistic. For instance, by just increasing your annual subscription price, your ARR in the calculator will be higher across the board. But price changes like this, when not applied tactfully and in tandem with better features and user experiences, can cause problems with both acquisition and retention. The short-term gains you’d earn would quickly be wiped out by lower growth and retention rates.

In another example, if you focus on subscriber growth rate per month, you can adjust that metric in the calculator to directly see how that would impact revenue in real-time. Similarly, you could use the estimation of ARR to consider strategies you could invest in and subsequently implement to boost that metric in particular — like one of those strategies that keeps your retention rate positive, or a user acquisition push to keep your monthly growth rate up.

What to do next

The revenue calculator from Braavo and RevenueCat is an easy-to-use tool that helps founders quickly visualize future revenue performance based on current (or target) metrics. This calculator can provide founders with a clearer picture of their subscription app business and its long-term sustainability.

Whether it’s investing in your product, bolstering user acquisition, or adding people to your team, you can use this tool to highlight and better understand the areas where our business can change over time and plan accordingly. And if you don’t like what the calculator has revealed about your subscription app, now is the time to address those issues rather than a few years down the road when it’s too late. Don’t worry — there are resources that can accelerate your trajectory.

With a better idea of where your revenue goals lie and how you can continue to scale, it could be time to explore external financing. If you’re searching for a way to finance growth for your subscription app, Braavo is an excellent partner for revenue-based funding. By using modeling similar to this revenue calculator, Braavo partners with viable subscription businesses looking to reinvest in their subscription services and gives them the resources to grow sustainably.

Take a closer look at Braavo to see if we’re the right financing partner for your app business.