Ecommerce math
Value a subscription commerce business using MRR, monthly churn, MoM growth, gross margin, and an ARR multiple. Rule of 40 + churn verdict included. Free. No signup.
Implied valuation
$2,880,000
3.0× ARR on $80,000 MRR
Growth + margin > 60. Institutional-quality subscription business.
Typical healthy subscription range. Lifespan 17–33 months. Buyers will underwrite at the middle of the valuation range.
Rule of 40 = annualized growth % + gross margin %. Margin is proxied by gross margin here — swap for contribution margin for a stricter read. You are at 60% margin today.
Assumes MRR is steady-state and churn applies equally across cohorts. Real subscription businesses often have cohort-dependent retention curves (new cohorts churn harder than retained ones) — pull 12 months of cohort data from Stripe before signing.
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Predictability. A subscription business with a known churn curve has highly forecastable forward revenue; transactional ecommerce has to re-earn every month's sales. Buyers pay 3–5× ARR for sub-commerce vs 2.5–3.5× SDE for transactional not because the businesses are bigger but because the cash flows are more reliable.
A single-number health check for subscription businesses: annualized growth % + profit margin % should sum to ≥40. A business growing 30%/yr at 15% margin hits 45 (healthy). A business growing 10%/yr at 50% margin hits 60 (elite). Below 40 and the business isn't justifying its multiple relative to alternatives.
This tool uses monthly churn because it's how Stripe/Recurly dashboards report it and how cohort retention curves are most commonly analyzed. Annualized churn ≈ 1 − (1 − monthly)^12. A 4%/mo churn = ~39% annual churn; a 2%/mo = ~22% annual.
Revenue minus cost of goods + fulfillment + payment processing. For box-of-the-month brands that ends up 40–60%; for software-wrapped subscriptions (personalization, curation) it trends higher (70–85%) because the incremental cost per subscriber is lower.
The multiple you enter is the midpoint; the range is ±1× on either side to visualize how sensitive the valuation is to multiple assumptions. For a tighter range, the Multiple Calculator returns a benchmarked per-platform range that you can apply via ARR × that range.