3 ms·
OP here. My point is that getting paid yearly, especially if a lot of your subscribers pay yearly, means you're back to a similar feast-or-famine kind of cash f
by joisig 7y ago
OP here. My point is that getting paid yearly, especially if a lot of your subscribers pay yearly, means you're back to a similar feast-or-famine kind of cash flow situation as when you're transactional (e.g. an e-commerce shop). This is more hassle since you now need to be more careful about managing your cash flow and making sure you put aside for the leaner months. I fully acknowledge that it is a great hack for customer-funded startups (we do it ourselves at CrankWheel); as with all the "rules" it's more about becoming aware of the hassle associated with a given decision.
I also question whether annual billing increases retention, when your retention is good already (say, 3-5 years projected lifetime). Sure, it lifts your retention when your average lifetime is less than a year, but does it really when you have very low churn? Or are those big annual bills going to be scrutinized more thoroughly than a monthly cost?
- ThisIsTheWay 7y agoIf you’re handling revenue properly, cash flows aren’t an issue. A subscription paid upfront should be spread across the period of the subscription as deferred revenue. https://www.thesaascfo.com/deferred-revenue-saas/ https://www.thesaascfo.com/deferred-revenue-saas/
- benjaminjosephw 7y agoAnnual subscriptions are particularly valuable for SaaS companies which are growing consistently. If I can reinvest the profits from an annual subscription in my growth engine I've self-funded growth that I would otherwise not have had. I'd only want to do this if my investment were likely to produce a higher value over the same period than revenue lost from the discount I've given my customer. Regardless of retention benefits, if you've got predictable growth then annual subscriptions should be well worth the discount.