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Are you offering annual billing on your pricing page? If not, you're with the majority of SaaS companies missing out on substantial Revenue. Adding a yearly option alongside your monthly plan (Even if only 10-20% of customers take the option), it will improve your cash flow immediately and boost your customer retention in the long-term.

  • LP

    Leusely Phicil

    over 3 years ago #

    I didn't realize an annual billing model would cut down churn. Good insight, thanks for sharing !

  • MB

    Morgan Brown

    over 3 years ago #

    Like anything, test it!

    We've found success with: quarterly plans, annual plans and 2-year plans. (monthly is good for promotions but the churn is too high!)

    • JM

      Jordan McBride

      over 3 years ago #

      absolutely a great point @morgan . Testing is really gonna shed light on what works best for you.

      Monthly plans will definitely see higher churn than quarterly or annual. It's just the nature of the beast.

      • MB

        Morgan Brown

        over 3 years ago #

        What we found that was interesting is that we saw no difference in conversion rate between offering a quarterly option and a monthly option. So simply by removing the monthly option for most visitors we upped our AOS, lowered our churn and improved upfront cash for the business. #win

    • WC

      Walter Chen

      over 3 years ago #

      How do you entice people into the 2-year plans?

      • MB

        Morgan Brown

        over 3 years ago #

        We use a slight discount (10%) and a price guarantee (we've raised prices recently).

  • LP

    Leusely Phicil

    over 3 years ago #

    Nice article ! Thanks for sharing.

  • JM

    Jordan McBride

    over 3 years ago #

    Optimization is key! something as simple as adding an annual billing option can take a business to that next level of success! #Gains

  • SE

    Sean Ellis

    over 3 years ago #

    This is a really great article that ties together some of the most important fundamentals of SaaS. I've already passed it along to several people.

    In a past company we offered much bigger discounts for annual plans (around 40%) and this helped us operate the business with cashflow positive results from a very early stage of scaling. It also helped us grow faster with less capital since we had a 3 month pay back on marketing dollars invested. As a result we were able to spend over $10M per year on customer acquisition yet never had more than $3M in capital tied up in marketing (waiting for ROI).

  • VC

    Vlad Calus

    over 3 years ago #

    Absolutely great post! Preparing now for beta, and these metrics are amazing. Thank you!

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