Recurring Revenue Profit: Model Cancellations and Service Costs

Use this example for an established monthly service with several customers. It models the service pool, rather than the work behind one retainer. Bring active customers, cancellation dates, fees, collections and actual delivery costs.

Define when a customer counts

In this fictional forecast, cancellations and new starts take effect at the start of the month. All closing active customers receive a full month at $150. There are no partial months, discounts or upgrades. Each month six customers cancel and ten join. These are chosen scenario counts, not an assumed constant churn rate or a prediction.

Delivery costs $70 per active customer and onboarding adds $30 for each new customer. The cost basis includes all modelled variable servicing and payment costs; shared overhead, acquisition spending and tax remain outside contribution.

Assumptions: Fictional Australian-dollar management example. Revenue and costs exclude any recoverable GST; non-recoverable tax is included in costs. No GST entitlement or income-tax deduction is assumed for your business. Contribution is before unallocated overhead and income tax.

Period	Opening	Cancel	New	Active/billed	Revenue	Delivery + onboarding	Contribution
Month 1	100	6	10	104	$15,600	$7,580	$8,020
Month 2	104	6	10	108	$16,200	$7,860	$8,340
Month 3	108	6	10	112	$16,800	$8,140	$8,660
Month 4	112	6	10	116	$17,400	$8,420	$8,980
Month 5	116	6	10	120	$18,000	$8,700	$9,300
Month 6	120	6	10	124	$18,600	$8,980	$9,620

Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.

Month 1 closes with 100 − 6 + 10 = 104 customers. Revenue is 104 × $150 = $15,600. Costs are 104 × $70 + 10 × $30 = $7,580, leaving $8,020 contribution.

Keep the original cohort visible

A cohort groups customers by when they started. For this example only, assume all six monthly cancellations come from the original 100 customers and none of the new ones leaves during the six months. This lets you compare total growth with retention.

Assumptions: Fictional Australian-dollar management example. Revenue and costs exclude any recoverable GST; non-recoverable tax is included in costs. No GST entitlement or income-tax deduction is assumed for your business. Contribution is before unallocated overhead and income tax.

Period	Original 100 remaining	Newer customers remaining	Total active
Start	100	0	100
Month 1	94	10	104
Month 2	88	20	108
Month 3	82	30	112
Month 4	76	40	116
Month 5	70	50	120
Month 6	64	60	124

Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.

The customer pool grows to 124 while only 64% of the original group remains. In your records, track each joining month's cohort separately instead of assuming all departures come from the first group. Stripe's cohort documentation explains grouping subscribers by when they first generate recurring revenue.

Compare customer churn with revenue churn

For this worksheet, monthly customer churn is cancellations divided by opening active customers: 6% in month 1 and 5% in month 6. The denominator changes. State your definition when comparing a platform dashboard, which may calculate its metric differently.

Track recurring revenue lost from cancellations and downgrades too. Losing one large account can matter more than losing several small ones. Stripe's revenue-churn guide distinguishes gross revenue losses from a net measure that also includes expansion. New-customer revenue should not hide retention losses.

Test support effort and collections

Assumptions: Fictional Australian-dollar management example. Revenue and costs exclude any recoverable GST; non-recoverable tax is included in costs. No GST entitlement or income-tax deduction is assumed for your business. Contribution is before unallocated overhead and income tax.

Month	Active customers	Base contribution	Support +$20/customer
1	104	$8,020	$5,940
2	108	$8,340	$6,180
3	112	$8,660	$6,420
4	116	$8,980	$6,660
5	120	$9,300	$6,900
6	124	$9,620	$7,140

Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.

If service cost rises from $70 to $90 per active customer, month 6 contribution falls from $9,620 to $7,140, even though revenue remains $18,600. Multiply the extra $20 by 124 customers to find the $2,480 reduction. Use customer cost to serve to locate the extra work.

The forecast assumes billed revenue, not confirmed bank receipts. Add due dates, failed payments, arrears and refunds to your cash forecast. Have accounting treatment checked separately; recurring-revenue metrics are not a substitute for the accounts.

Where to get help

Ask your accountant to review the customer roll-forward and cost basis. The pricing and profit hub connects this forecast with service, capacity and customer-profitability reviews.