SOP #60 — Cohort Churn Analysis That Killed a $360k MRR Story

SOP #60 — Cohort Churn Analysis That Killed a $360k MRR Story

Subscription box, $30k MRR, listed at 12x MRR ($360k). Flat MRR looked healthy. Cohort math told the truth:

1. Demand a cohort table — for each signup month, how many subscribers remain N months later. Headline MRR hides this.
2. Compute monthly logo churn from the cohorts. Pass if under 7%. Result: 14% monthly churn.
3. Check what's replacing churned revenue — flat MRR plus high churn means heavy paid acquisition. Result: $9k/mo ad spend to stand still.
4. Subtract real acquisition cost from MRR to get the true margin, then re-multiple.

Outcome: the business was a leaky bucket bailed out by ad spend, not a growing subscription asset. True profit after replacement acquisition was a fraction of the headline. We passed on the $360k. Flat MRR with 14% churn is a treadmill, not a business.

Save this — run it every deal.