How to Calculate the Average Revenue Per Unit

Average revenue per unit, or ARPU, can be a useful metric when analyzing subscription-based businesses.

Oct 17, 2015 at 12:24AM

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Average revenue per unit is a metric used by companies that offer subscription-based products and services, such as mobile phone carriers and Internet service providers. This can be useful for several reasons, so if you follow any companies that rely on subscribers, here's what you should know about ARPU and how to calculate it.

How to calculate ARPU
The formula for calculating ARPU is pretty straightforward. Simply divide the total revenue by the number of subscribers. Usually ARPU is calculated for either a monthly or annual time period, but it could be done for any interval.

Arpu Formula

Notice that in the formula, we use the term average subscribers, as the actual number of subscribers can change constantly. So to come up with an accurate calculation, companies need to calculate (or at least estimate) the average number of subscribers during the time period.

For example, let's say that a cable company generated $1 million in revenue last month, and that the average number of subscribers during the month was 50,000. Then, the ARPU could be calculated as:

Arpu Example

Why it's useful
There are a few reasons calculating ARPU can be useful. For starters, it can be used when comparing similar companies in order to determine which does the better job of generating revenue from its subscribers. If one Internet service provider produces a higher ARPU than another with comparable expenses, it's a good bet that the one with the higher ARPU is more profitable.

Or, it can show investors which products, services, and promotions are good at increasing revenue on a per-customer basis. In other words, if a certain telecom company gains 50,000 new customers, of course its revenue is going to increase, which may or may not translate to more profits. However, if a company can produce more revenue from its existing customers, it can be a much easier way to boost profitability.

For example, if a cable company generates $50 in monthly ARPU, and after implementing a promotional deal where customers can get two movie channels for the price of one, ARPU jumps to $60, the promotion might be considered a success.

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A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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