Subscription Revenue Model (spreadsheet)

Using this formula, I get different results for "Avg customer lifetime (months)" than the OP.

I calculate the average length of the customer tenure based on the formula: 0.5 = (1-churn%)^t, where "churn%" is the monthly churn rate, and t is time passed in months. Basically, this formula says: when will 50% of the customers be left?

You can solve for t:

0.5 = (1-churn%)^t

ln (0.5) =ln(1 - churn%)^t

ln (0.5) =t x ln(1 - churn%)

t = ln (0.5) / ln (1 - churn%)

You can test this math by calculating how long t is for a churn of 50% (it's 1 month).

Using this math, the average tenure for a monthly churn of 1% would be 60 months. The average tenure is useful because you can then do a discounted cash flow analysis on 100% of the cash flows until time t, to calculate the lifetime value of the average customer. So in this case, you would be discounting 100% of 60 months of cash flows.

The average tenure goes down rapidly as you increase the churn rate. At 2% churn, the average tenure is 34 months. At 3%, it's 23 months. At 5%, it's 14 months. And at 10%, it's 7 months.

If you have enough data, you can use a non-constant churn rate as well, as churn rate definitely goes down over time.

And along the same lines, is it more reasonable to make estimates on page views or uniques per month??