Why aren’t there more indie hackers with specialty SaaS products north of $500 MRR a subscription?
I’ve been watching a lot of IndieHackers launch on here, and it seems the most SaaS subscriptions have MRR lower than $100/month... most under $50/month it appears.
I’m curious as to why more haven’t built specialty products for the mid market where you could tackle larger MRR. That would mean you could manage less customers for the same revenue, but does mean more revenue churn on individual losses. The efficiency ratio of so many things is better when you aren’t having to handle 1,000s of small $10/20/30 month customers who demand way too much for what they pay for.
So... why do it? Why not raise your prices (within reason)? I’m looking at a three tier system of $199, $499 and $999/month for a service targeting the mid market enterprise (MME). So far the tests show that the market will bare it.
I see few IndieHacker SaaS businesses modeled like this. I’m wondering why. Am I missing something?
Many of the products I've built, or am building, are targeting folks that don't have the discretionary income to spend on things. Unfunded, nontechnical founders, for example, are just that: unfunded. For them to spend $20 a month is a big investment.
I'm experimenting with a one-time purchase + ongoing services model for my next concept. Something like a $499 fee one time, but that's it. If you want updates and ongoing help and support, there's a recurring fee. It'll be interesting to see how this works out. Might blow up in my face, but we'll see!
Let us know how it goes. Experimentation is never a bad thing, as long as you can measure and learn from it.
Trust me, I have enough war wounds on what NOT to do.
Good luck!
We raised our monthly price from $27/mo to $34/mo and instantly grew our revenue and so very glad we did. Good strategy is to keep adding value and iterating on the product and raise your price and thus your revenue
Do you ever see yourself adding enough value to push that to $99/month or $134/month?
Upsells are always a good strategy with addons... and its usually much easier to sell to existing customers... your CAC is way better. I can appreciate that.
But... would you ever build something that was more money to buy into? Why or why not?
Let's use your numbers. Let's assume:
(adjust numbers to suit your actuals)
So you have an LTV of around ~$900.
Now imagine that is was $134. Now you are talking an LTV around $3.6K. Same customer. Same effort.
Now imagine that you could have a churn closer to 2% (since its a bit more money invested, they are less likely to churn out if there is more value). You are talking about an LTV around $5.4K.
Big difference between $900 and $5,400. Same customer. Same effort to sell to, manage and support.
I'm curious if you ever thought about it in those kind of numbers. Or if you feel you could never deliver that value to the audience you like to engage with.
Because the higher up the scale you go, the harder sales are. Companies want you to fill in an RFP. they want you to give them live demos of the product, in house training etc.
I don't disagree with you though, I think as a general rule we should all raise prices regularly as we provide more value. I'm guilty of having prices way too low myself.
Thanks for sharing your thoughts. I see where you are coming from, but in the lower midmarket $250 to $1,000 a month doesn't usually need a RFP. They can and will just put it on their credit card. When I was CTO of an MME company I rarely bothered with RFPs and long contract negotiations for things that solved pains we had that was under $5K-$10K/year. As long as it was in budget and delivering value, it was more a pain to go through all that process.
Why do you think Salesforce was so successful? Or Zendesk? Or status.io (to be a bit more indie focused)?
Absolutely agree that its a bit more of an assisted sale. Demos are common. Training is an actual thing (which you can charge for btw by wrapping it into the subscription to increase the ARPA). But these are also all areas that you can do 1-to-many when it comes to content creation and delivery. You can also automate quite a bit.
I guess what I am searching for is the REASONS many indie hackers are so scared to move up channel and charge more for their products. While I have definitely seen some crappy products out there, I have also seen some amazing ones that it seems people aren't charging enough for.
I mean, look at status.io. Talk about a simple application. When I looked at the buy vs build and the need for my cloud ops team to manage the conversation with customers, paying $349/mo makes total sense. I've seen IndieHackers build similar things, and charge a fraction of that, leaving money on the table. It just doesn't make sense. Which is why I am trying to get to the psychology behind those decisions.
Your comment about raising prices regularly as you provide more value is interesting. Its always easier to drop a price than increase it. Big uphill battle in re-educating customers on increased value that they may (or may not) perceive is worth it to them. Which then means grandfathering. Unless you separate the value and make it an addon upsell, which is always a good thing. I wonder how other IndieHackers think about this. Hopefully some will chime in.
Appreciate your time thinking about this and responding. Love the conversation.