May 11, 2026

Membership 101

In my hot new AI startup, I’m charging $20 a month for an AI that automatically sends you photos of your pet whenever your Ring camera spots them.

I post on TikTok constantly to get hundreds of signups every month, but only 60% of them stay after the first month trying it out. And after that, I manage to keep 90% of them - the occasional payment fails or they cancel because their dog grew up and is moving out to become a full-time blogger.

So… how many subscriptions will I end up having eventually? Could I figure out how much my business could earn?

The simple version is:

stable members = monthly acquisitions / (1 - paid monthly retention)

Alas, we have to account for the first month churn, because 40% of people just don’t love their pets enough.

That means our formula is:

stable paid members =
  (monthly acquisitions × free-trial retention)
  / (1 - paid monthly retention)

The graph rises toward the equilibrium level, where new paid members from the acquisition funnel exactly offset paid member churn.

The more interesting part is the return on increasing retention: if you improve the paid retention rate by 1 percentage point, the stable members increase by 10% to 3,333. That’s becase you reduced the churn rate by 10% relatively - from 10% to 9%.

This gives you increasing returns on each percentage point improvement: going from 97% paid retention to 98% paid retention [1] enormously increases the stable paid members from 10,000 to 15,000!

[1] AKA reducing from 3% churn rate to 2% churn rate, a 33% reduction