"Two months free" is the most common annual offer in SaaS and one of the most commonly miscalculated. It is not 20% off.
"Two Months Free" — What Discount Is That Really?
It is 16.67%, not 20%. Convert any months-free offer into its real percentage.
$/mo
"Two months free" is charged as ten months of the monthly price billed once a year.
Annual price$490.00$40.83/month effective
- Normally
- $588.00per year
- Customer saves
- $98.00
- Real discount
- 16.67%
2 months free is a 16.67% discount — not 20%. The denominator is twelve months, not ten.
What each offer really discounts
1 month free8.33%
2 months free16.67%
3 months free25.00%
4 months free33.33%
The arithmetic
At $49 a month, a year at full price is $588. Two months free means you charge for ten months: $490.
Full year: $49 x 12 = $588
Two months free: $49 x 10 = $490
Saved: $98
Discount = 98 / 588 = 16.67%The common error is computing 2 ÷ 10 = 20%, using the months charged as the denominator. The discount is measured against what the customer would have paid, which is twelve months.
| Offer | Months charged | Real discount |
|---|---|---|
| 1 month free | 11 | 8.33% |
| 2 months free | 10 | 16.67% |
| 3 months free | 9 | 25.00% |
| 4 months free | 8 | 33.33% |
Why the distinction matters
- Forecasting. Modelling 20% when the real figure is 16.67% understates annual revenue by about 3.3 points.
- Comparison. A competitor offering a flat 20% is more generous than two months free, not less.
- Margin. The discount comes straight out of gross profit, so the difference compounds across every annual customer.
GOOD QUESTIONS
Frequently asked
Is two months free the same as 20% off?+
No. It is 16.67%. You charge for ten months out of twelve, and the discount is measured against the twelve months the customer would otherwise have paid: 2 ÷ 12 = 16.67%. Dividing by the ten months charged gives 20% and is the usual mistake.
What discount is three months free?+
25%. Three twelfths of the annual price. Four months free is 33.33%, which is unusually deep for SaaS and typically only appears in launch offers.
Should I say 'two months free' or '16.67% off'?+
Two months free, in customer-facing copy. It is easier to picture and reads as more generous than the equivalent percentage. Use the percentage internally so your revenue model is accurate.
Do I have to give exactly two months?+
No. Any discount works; two months free is simply a convention because it is easy to say. If you want a round 20%, that is 2.4 months free — better advertised as a percentage.