# How annual plans flatter your churn

> A customer who paid for a year can't leave for a year. Count them like monthly customers and your churn looks better than it is.

By Luis Miguel, founder of TrustChurn. Published 2026-10-31.
Web version: https://trustchurn.com/blog/annual-plans-and-churn

Annual plans make churn look lower than it is because an annual customer can only leave at renewal. Counted like monthly customers, they sit in the base as perfect retention for eleven months, so the more customers you move to annual plans, the better your churn looks, even if nobody stays any longer. The fix is to leave out the annual customers who couldn't have left in the period you're measuring, and to track their renewals on their own.

None of this is a reason to drop annual plans, which are good for cash. The problem is only in how they're counted.

## How much do they flatter the number?

Take 50 paying customers, 30 monthly and 20 annual. Over the last 90 days, 3 monthly customers canceled. None of the annual customers had a renewal in those 90 days.

Counting everyone, you lost 3 of 50. You kept 94%, which is a monthly churn of 2.0%.

But the 20 annual customers couldn't have left. They weren't at risk. Count only the customers who could have canceled and you lost 3 of 30. You kept 90%, a monthly churn of 3.5%.

Nothing changed between the two calculations except who's in the base. The first number is lower only because 40% of your customers were locked in.

The bigger your annual share, the bigger the gap. With half your customers on annual plans and the same 3 monthly cancellations, the all-in number would drop further while the monthly customers churn exactly as before.

## Then the renewal month comes

Once a year, every annual customer comes up for renewal and decides whether to stay. If you signed up a lot of them in one launch or one Black Friday, their renewals land in the same few weeks, and a churn number that looked calm all year can jump in a single month.

A month like that may say more about when those customers signed up than about the product, and knowing when your renewals cluster helps you read it for what it is.

## What TrustChurn does instead

On TrustChurn, an annual customer whose renewal didn't fall inside the 90-day window sits out of the calculation. In those 90 days they had no chance to leave, so they tell us nothing yet. If their renewal did fall in the window, they count like anyone else: renewed is kept, didn't renew is lost.

If an annual customer leaves early anyway, with a refund or an immediate cancellation, they count as lost, same as a monthly one.

Every profile also shows the share of customers on annual plans, so you can see how much of a SaaS's base the number is really about.

## How does Stripe treat annual subscribers?

In its Billing analytics, Stripe turns an annual price into a monthly amount for MRR (a $600 plan becomes $50 a month), and counts the subscriber as active every month of the year. So Stripe's subscriber churn rate includes annual subscribers in the base all year, the same way the 2.0% above does. It's also one of the gaps covered in why [Stripe's churn rate doesn't match yours](https://trustchurn.com/blog/stripe-churn-rate-doesnt-match).

## How should you measure annual customers?

**Renewal rate.** Of the annual customers who came up for renewal in a period, how many renewed?

```text
renewal rate = annual customers who renewed / annual customers whose renewal came up
```

With a small base it's a handful of customers a month, so look at it over a quarter or longer.

**Comparing it with monthly churn.** An annual renewal rate and a monthly churn rate can't be compared directly. To put a renewal rate on a monthly scale, use the same kind of conversion as for any other window:

```text
monthly equivalent = 1 - renewal rate^(1/12)
```

An 80% renewal rate works out to a monthly churn of 1.8%. Treat it as a rough comparison: annual customers decide once a year, not a little every month, and the people who pick an annual plan may not behave like the ones who pay monthly.

**Scheduled cancellations.** In Stripe, a customer who cancels "at the end of the period" stays active and keeps access until the date, with `cancel_at_period_end` set to true on the subscription. On an annual plan that can be months of warning. That's about as early as a warning gets, and it's easy to miss, because the customer keeps using the product as if nothing happened. More in [how to find scheduled cancellations](https://trustchurn.com/blog/scheduled-cancellations-stripe).

**The monthly-to-annual switch.** If you count annual customers like monthly ones, your churn drops when monthly customers move to annual, and that drop isn't retention. Compare monthly churn for monthly customers only, before and after, to see whether anything changed.

## A few habits that help

- Keep two numbers: monthly churn for monthly customers, and the renewal rate for annual ones. Report them side by side.
- Write down when your annual renewals fall, at least by month. It tells you when to expect a lumpy month.
- Write to annual customers a month or two before renewal, not on the day, with what changed in the product during their year. A renewal charge nobody expected is an easy reason to ask for a refund.

The exact rule for annual plans is written out on the [methodology page](https://trustchurn.com/methodology).

## FAQ

### Should annual customers count in monthly churn?

Only when they could have left. An annual customer whose renewal wasn't in the period you're measuring had no chance to cancel, so including them makes churn look lower. Include the ones whose renewal came up, and count them as kept or lost by whether they renewed.

### How do I compare an annual renewal rate with monthly churn?

Convert the renewal rate with `1 - renewal rate^(1/12)`. An 80% renewal rate is about 1.8% a month. It's a rough comparison, because annual customers decide once a year instead of every month.

### Do annual plans reduce churn?

They delay it and bunch it into renewal months. Whether they reduce it depends on how many customers renew. The way to know is to track the renewal rate, not the all-in churn number, which goes down as soon as more customers are on annual plans.

### When does an annual customer count as churned on TrustChurn?

When their renewal falls inside the 90-day window and they don't renew, or when their subscription ends early with a refund or an immediate cancellation. If their renewal wasn't in the window, they're left out of the calculation.

### Does Stripe count annual subscribers as active every month?

Yes. Stripe's Billing analytics normalizes the annual price to a monthly MRR and counts the subscriber as active until their subscriptions are canceled or marked unpaid.

---

Keep reading:

- [How to find scheduled cancellations in Stripe](https://trustchurn.com/blog/scheduled-cancellations-stripe.md)
- [How to calculate your monthly churn from Stripe](https://trustchurn.com/blog/how-to-calculate-churn-from-stripe.md)

TrustChurn is a public ranking of SaaS by monthly churn, read from Stripe with a read-only restricted key, not typed by the founder. The formulas are public: https://trustchurn.com/methodology