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Suppose a business has four customers: A, B, C, and D. Each buys a $100/year contract:
  • Customer A subscribes in Jun ‘19, and remains a customer thereafter.
  • Customer B subscribes in Jun ‘19, and remains a customer thereafter.
  • Customer C starts in Jul ‘20, but stops in Jul ‘21.
  • Customer D starts in Aug ‘20, but stops in Oct ‘20.
The following diagram illustrates the customer lifetimes across the timeline, with vertical markers highlighting the Start and End of 2020: Customer lifetimes showing when each customer (A, B, C, D) was active, with vertical bars marking the Start and End of 2020 Suppose you are studying ARR/logo movements across 2020. In particular, you are trying to answer the question: How many new customers in 2020? How many churns? There are two possible answers:
  • Answer A. During 2020, two customers subscribed (C and D), and one customer churned (D): so 2020 New ARR is $200, and 2020 Churn ARR is $100.
  • Answer B. At the beginning of 2020, two customers were there (A and B); at the end of 2020, A and B are still there, and a new customer joined (C): so there was no churn (both A and B are still customers), and there is a $100 New ARR.
So:
New ARRChurn ARR
Answer A$200$100
Answer B$100$0
Both answers are legitimate, and Dealbase offers the possibility of obtaining both results. To compute them:
  1. You first produce a revenue input table displaying the data above.
  2. You generate a monthly waterfall.
  3. You aggregate to a yearly waterfall:
    • To obtain Answer A, you include intra-year fluctuations. In this case, Dealbase adds up all monthly ARR movements occurred during year 2020 to achieve 2020’s New, Upsell, Downsell, and Churn ARR figures.
    • To obtain Answer B, you exclude intra-year fluctuations. In this case, Dealbase takes two snapshots of the customer base at the beginning and at the end of 2020 (columns Dec-19 and Dec-20 of the Revenue Input Table), and determines which Dec-20 customers are new (meaning they were not there in Dec-19), which Dec-19 customers have churned, how much they have increased (upsell) or decreased (downsell) their ARR compared to Dec-19.

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How to Toggle This Option in Dealbase

You can control whether to include or exclude intra-year fluctuations in your waterfall computations directly from the Dealbase interface: Screenshot showing where to find the intra-year fluctuations toggle option in Dealbase

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When to use Method A vs. Method B

Method A has the privilege of showing all movements that occurred within the period. In the provided example, it is capable of capturing the phenomenon of Customer D subscribing and then unsubscribing after a few months — while, if one only looks at Method B’s churn figures for 2020, it may seem that there’s no churn rate in the business, hence no unsatisfied customer. Method B is better suited for volume-based businesses. Suppose you have a volume-based business in which a customer each month upsells and downsells, like in the example below.
MonthJanFebMarAprMayJunJulAugSepOctNovDec
Customer 1$100$120$80$110$130$70$100$120$90$100$110$80

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Understanding Method A: Monthly Fluctuations Breakdown

If one computes Customer 1’s upsell in 2020 using Method A, one would say that this $100/month customer has undergone a $140 upsell and a $160 downsell. Here’s how these totals are calculated: Monthly Upsells:
  • Feb: +$20 (from $100 to $120)
  • Apr: +$30 (from $80 to $110)
  • May: +$20 (from $110 to $130)
  • Jul: +$30 (from $70 to $100)
  • Aug: +$20 (from $100 to $120)
  • Oct: +$10 (from $90 to $100)
  • Nov: +$10 (from $100 to $110)
Total Upsell: $140 (= $20 + $30 + $20 + $30 + $20 + $10 + $10) Monthly Downsells:
  • Mar: -$40 (from $120 to $80)
  • Jun: -$60 (from $130 to $70)
  • Sep: -$30 (from $120 to $90)
  • Dec: -$30 (from $110 to $80)
Total Downsell: -$160 (= -$40 + -$60 + -$30 + -$30) Net Change: -$20 (from $100 in Jan to $80 in Dec) The following chart visualizes these monthly fluctuations: Bar chart showing monthly upsells (positive bars) and downsells (negative bars) for Customer 1 throughout the year Whereas Method B just detects the overall $20/year downsell (comparing Dec to Jan: $80 - $100 = -$20).