We don’t do it all the time but we do it.
And there are a lot of SaaS experts that will tell you it’s a foolish idea. Cutting off your long term revenue growth.
Short term cash that can be addicting but never good for the companies health.
We think that is true in some cases but not all.
For your average SaaSpnr who is bootstrapping his or her way out of the 9-5, a lifetime subscription can be a life saver.
5 reasons why and when you want to sell lifetime subscriptions
1: When your churn sucks
Obviously, if you have historically high churn then that is bad. But what is driving that churn?
You first have to get your arms around that.
Is it bad product market fit? Is it a wrong pricing structure? Is it a poorly developed product?
In our case churn wasn’t horrible but it was bordering on the line of troublesome for a SaaS app, we felt.
As troublesome as it is, we were keeping close track of every reason why folks would quit and after reviewing it, we knew overall what the problem was.
We had a temperamental and finicky customer and it wasn’t always a great product market fit.
Our users sold on Amazon one day and then quit the next. They had money and then ran out of money.
But there is a lot of people selling on Amazon so we were ok with users coming and going but it required some counter-strategy for us to see some consistency in our business.
We knew that our churn was sometimes as short as 6 months so we started thinking.
What if 🤔 we offered a lifetime subscription after X amount of months to capture some additional revenue that might have otherwise left us.
Turns out, that is a great idea for us. (maybe not for your app)
We sent out the first email to our customer base and we sold (20) $699 SaaS lifetime subscriptions for a total of roughly $14,000.
There is no telling who if any of those buyers would have left us in 6 months or would have paid us but it was a gamble 🎲 we were willing to take because we knew our churn numbers pretty well.
2: It’s better than raising VC money or taking a loan
We’re trying to stay bootstrapped and so we didn’t want to raise any money.
We needed a little money because we wanted to re-launch our app on some new tech and add some great features. But more importantly, we wanted to move fast in our market and get our 2.0 out to the world.
Taking a loan was an option but we didn’t want to pay a high interest rate and be stuck with a payment for 3-5 years.
So we decided to “harvest” money from our current users to fund our new remote team we had built.
3: Built in cheerleaders and product advocates
It’s pretty safe to say if the customer is willing to plop down a large amount to use your software then they are pretty happy with it.
But there is no telling how long they will stick around as competition increases.
A positive benefit to selling small batches of lifetime subscriptions is that you end up grooming lifelong cheerleaders for your product.
They now have a sunk cost in their purchase which means they are more willing to use your application repeatedly for the long term as they want a return on their money.
They were happy enough to buy the lifetime subscription so now you’ve created a potential lifelong fan of your product.
That fan will share your product in tweets, Facebook messages, blog articles and YouTube videos.
4: Customers tend to be more forgiving
Purchasers of our lifetime subscription have just removed that mental timeline from their conscience.
Buy bye anxiety around that monthly payment. See ya later budget minded after thoughts.
Your customer is fully committed now.
And now that they are, we’ve seen them be way more forgiving if or when something breaks or a server goes down or some other bug
5: You’ll catch up in the long run
In our instance, we our growing fast.
Yes we sacrificed 40 or so monthly paying users for a short term cash boost but we tied the money back to a better product and our customers knew this.
We didn’t go to vegas and blow it. We spent it on engineering.
So it was a win-win all around for us and them.
We knew our upward trajectory was good and we knew we would come out the other end with a better product and retained equity.
Confident in adding 130+ customers a month, we knew we could make up for the loss revenue each month over the next 12 months by replacing that monthly revenue with new users.
Comment below or fight me!
Would love to hear your thoughts on whether you agree with our strategy good or bad below.