Charging monthly vs. yearly

I started monthly but have switched to yearly payments. (For now... will see how it goes)

Here’s why: I read or watched a video on this topic (can’t remember which) but basically if you’re charging monthly and if your project grows fast, you won’t have enough cash to manage the project

For example
50 customers that pay you $5 p/mo will get you $250 but you still need to handle that 50 customers (with support in that month)
But 50 customers that pay you yearly $60 gives you $3000 for that same month, giving you much more room to breathe and provide better support.

Now of course it’s much harder to get customers that can pay upfront ...

Hi Lukas. We only offer annual.

We started off monthly, but soon found a tight correlation between people who bought annual and the quality and depth of their feedback. They felt they had a strong affinity with the product and so were super motivated to provide constant feedback.

So we switched to annual only. At this point, and we are definitely profitable, we value feedback rather than bigger numbers. As it's sub £100 is still acceptable to those who have the burning problem we're intent on solving.

We will certainly introduce monthly at some point to catch the users who want to try for a month etc, but obviously at a higher price point than the annual (when divided by the 12 months). We're in no rush to grow income, but rather a solid product. And to do that the feedback we get is invaluable.

Plus the often overlooked bonus is we get the cash upfront, rather than getting a little every month. Which goes right back into development and advertising.

Hi Lukas -

I think this highly depends on your target buyer and the target price range.

To give some contrast. I run a startup and I NEVER purchase annual, even if i know it'll save me 20% - 30% over time. I like having the cash on hand and the flexibility to change if a new/better service arrives.

On the flip side, the target customer we sell to works on annual budgets and through procurement teams/departments. For them, they have a set annual budgets, change is hard, and they hate procurement, so they almost always opt for annual plans.

Focus on your target customer and how they make purchase decisions, what their cash flow position is, and how change happens in the org.

The other factor is price point. If we are talking $9/mo vs $79/year, I'd probably purchase annual, because it's such a nominal price point. At least for me, the point where it's starts to hurt is around that $20/mo $200/year range.

Given nature of product annual only seems fine. Can revise later if needed but just an added complication at this point.

What is the price point @lukasf ?

Hi @lukasf , I don't have experience offering monthly or yearly plans but I would just like to say as a customer I prefer monthly to be able to leave if I'm not happy with the service in the month. I understand the business may need to lock customers into a yearly plan but as a customer, it may be too much of a commitment to a service I may forget about.