A software company gets 40 new customers per month, and also loses 40 old customers. On average each customer stays for 3 years. How many customers does this software company have? Thanks!
A software company gets 40 new customers per month, and also loses 40 old customers. On average each customer stays for 3 years. How many customers does this software company have? Thanks!
Hi there,
Q: A software company gets 40 new customers per month, and also loses 40 old customers. On average each customer stays for 3 years. How many customers does this software company have?
You can check what would happen after year 3, when the company starts to lose customers:
Best,
Francesco
Hi there,
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Best,
Hagen
The company has “3 years of customers”.
40 customers * 12 months * 3 years =1440 customers
Hi there,
key here is to account for the initial ramp up, where no attrition happens yet.
This means that after Year 3 you reach steady state of 1440 customers in total, as the net of inflows and outflows becomes 0.
Hope this helps.
Regards, Andi
(edited)
To calculate the total number of customers, we first need to find the number of customers gained and lost per year.
New customers per year: 40 (new customers per month) * 12 (months per year) = 480
Since the company loses the same number of customers as it gains, the company also loses 480 customers per year.
Since each customer stays for 3 years, the company maintains a consistent number of customers throughout this period. Therefore, the total number of customers will be the number of new customers gained over a 3-year period:
Total customers: 480 (new customers per year) * 3 (years) = 1,440
The software company has a total of 1,440 customers.
Hi there!
To calculate how many customers the software company has, we need to consider the net gain or loss of customers each month, and how long they stay on average.
In this case, the company gains 40 new customers and loses 40 old customers every month, so their net gain/loss is zero. However, we know that each customer stays for an average of 3 years, which means that the total number of customers is the number of new customers gained each month times the average length of time they stay.
So, to calculate the total number of customers, we can multiply the number of new customers gained each month (40) by the number of months they stay on average (36, which is 3 years in months):
40 * 36 = 1440
Therefore, the software company has 1440 customers.
Hope that helps!