Today, for the first time in our history, Less Annoying CRM is raising prices. Existing customers will stay at $10/user/month indefinitely, but anyone who signs up from now on pays $15.
Here are some thoughts I have about the price increase:
#1, the importance of taking things seriously:
Here's a blog post about the change: https://bit.ly/39bQe7d
Because $15 is still cheap and current customers aren't effected, several people have told me I'm overthinking this and shouldn't be so apologetic. I disagree. I forget where I read this, but: Imagine you're sitting at a table with a customer when something arguably bad happens (a bug, a price increase, etc.). There are two tokens on the table:
You can take whichever token you want. The customer will take the other one.
I think about this all the time. I tend to take everything too seriously. When customers see you taking things seriously, they're inclined to trust you, and they end up thinking it's not a big deal. Even though this new price doesn't impact current customers, it still sends a message. Should they worry that we've sold out? That we're moving upmarket? They could be worried, but because we over-communicated, they took the other token. When we announced this, we got dozens of kind messages from our customers. They loved the explanation, that we're grandfathering current customers, and that $15 is still cheap/simple. Some even volunteered to have their price increase. Could have gone the other way.
#2, why aren't we applying this to current customers? Partially because it'd feel slimy. Partially because we don't need to. One of our main costs is support, and most support time is spent on new customers. Sure, it'd be neat to get an immediate revenue boost, but what really matters is what new customers pay. Going to $15 means either user grow slows and our current support team can handle it, or it stays the same and we can afford to hire. This will make growth easier.
#3, simple pricing leads to a simple business. Our pricing will still be simpler that almost any other SaaS, but for the first time ever, not all users will pay the same amount. As a result, I've had to re-do a lot of the reporting I use to monitor the business. The main change is that "# of paying users" was our main metric. That used to directly tie to revenue, but it's not that simple anymore. We're switching to ARR going forward. The main thing I'll discuss with the team is "new ARR added this month"
Why ARR and not MRR? Obviously they boil down to the same thing, but I think it's easier to reason about annual costs vs. monthly. For example, a new developer starts around $75k/year. If we add $35k in ARR this month, that's almost half a developer's base salary. Or: Every employee at LACRM gets an automatic $10k raise every year. There are 14 employees (this doesn't count partners). So we need to grow ARR by $140k each year just to pay the raises we've promised. That's easier to understand than MRR I think.
I'll admit, I'm a bit bummed about the change. It was so clean to just focus on # of paying users. That's what we actually observe day-to-day. I just talked to a lead, they said they'd pay, that's one user. Now I have to think "that person is $180 ARR". Not as intuitive or human. More to the point, it makes me realize how much we've benefited from simplicity. It would be so much harder to run this business with different pricing tiers, annual payments, discounts, multi-year contracts, etc. If you're not a finance pro, keep it simple.
#4, one interesting thing I'm keeping my eye on is how this interacts with churn. At first, all churn will be $10 users and all growth will be $15 users, so even if we have zero net user growth in a month, we still grow revenue quite a bit. A normal month might have 200 net new users. At $15/user, you might think that means adding $36k ARR. But to net 200 users, we actually add ~600 and lose ~400. That's actually $60k in new ARR.
The impact of this will wear off over time as our $15 customers start to churn, but there should be a honeymoon period where our revenue growth increases almost no matter what (knock on wood I guess)
#5, how might this impact customer acquisition? Maybe not much. We should be able to spend 50% more to acquire each customer which should make some things easier, but it might not fundamentally change anything. Also, it might be counteracted by lower conversion rates. But it might result in a bigger change. It seems possible to me that this makes a lot of paid acquisition channels go from not viable to viable. It also seems possible it'll give us escape velocity with channels we're already using. What I mean is, we spend money on e.g. Adwords and Capterra. If we increase our budget, customer acquisition costs (CAC) get too high, but they might level off at some point. What if 50% higher CAC allows us to increase volume by much more than 50%?
#6, time will tell how this impacts the overall finances of the business, but I'm optimistic. At $10/user we were profitable, but just barely. Growth was a challenge, and we always had to make sacrifices. My goal is for this to let us do the same things, but more comfortably.
#7, let's say this goes as well as I'm hoping. Does that mean the "raise prices" crowd is right? Were we wrong to pick such a low price originally and stick with it for so long? Should we raise prices even more until it actually starts hurting growth? NO! I love being a low-cost option for small businesses. Being able to succeed with a low price point is a competitive advantage. I don't want to get complacent. Even if this goes well, I'll still be glad it took us 10 years. Maybe we do it again in another 10.
We found out some pretty big news yesterday: U.S. News and World Report put out a new ranking of CRM software, and they gave the #1 spot to Less Annoying CRM!
It's a bit surreal to have such a respected publication rank us, a tiny bootstrapped business, above multi-billion dollar competitors like Salesforce, Hubspot, and Pipedrive. We've won awards before for things like "best low-cost CRM" or "best CRM specifically for small businesses" but this is the first time we've been named the best overall, and it's probably the most reputable source that has ever written about us.
A few notes:
How did we make this happen?
Honestly, we didn't do much directly. The editor of this CRM review did reach out to us while they were writing it just to check some facts and whatnot, but we didn't do anything to initiate this. However, we put a lot of energy into getting lots of reviews on sites like G2 and Capterra, and we've worked to get some reviews from other publications such as PC Mag. I strongly suspect that if we hadn't done all that legwork, we wouldn't even have been on the radar for this new review. So depending on how you look at this, it either took close to zero effort, or it was multi-year process of reputation-building.
How might this help the business?
I'm not totally sure yet. If nothing else, it's been a fun thing for the team to celebrate. I think that founders normally don't need outside validation to stay motivated, but things like this can make employees feel even more pride in where they work.
It should also generate a bit of inbound interest in our product. It remains to be seen how much (since it's a brand new review, it isn't currently highly ranked in Google, but that might change given how big of a website USN&WR is). It's already driving a bit of traffic to our site that we can track, and presumably there's some that we can't track.
I'm learning that there's a PR opportunity here. We've never really had a major PR event before, but we have some advisers who think we can use this story (tiny CRM most people have never heard of beats Salesforce) to get other publications to write about us. I'm always a bit skeptical of PR, but this seems like as good a chance as any to see how it works, so we're going to give it a shot.
More important than any of that (in my opinion) is that this lets us instantly demonstrate credibility. Whether you're a lead who stumbles upon our site or a candidate thinking about applying for a job, hearing that U.S. News & World Report rated us as the best CRM in the world should instantly take you from "I've never heard of this company" to "Ok, I guess they're legit". So even if this doesn't generate a ton of new interest in our product, it should help us convert the people who are already looking at us.
Time will tell how big of a deal this is, but no matter what, it feels great to be recognized, and it's given the team a nice reason to celebrate.
We just officially launched a new version of Less Annoying CRM. Our whole team has been working on this since March, and it’s the biggest project in the company’s 10-year history. Not only is there a whole new design, but this update includes some major new functionality.
This is the first time we’ve ever had the full product team (4 software engineers plus myself) working on a single project. Normally each person just owns their own project and works independently, but this was too big for one person to handle it by themselves. I learned a ton about project management, planning, etc.
I think the most interesting learning experience for me happened in the last week. Just a few days ago if you’d asked me when the launch would be, I would have said at least a month from now. The only thing that changed between now and then is I moved some cards around on a Trello board.
I was looking at the massive amount of stuff we had left to do before launch, and I asked myself “what would happen if we launched without that stuff?” I realized that the answer was: nothing. Like, all of those things we were planning would be nice to have, but the new version is already such a huge step up over the old one, all the remaining work was just icing on the cake. So why not just launch now and build that other stuff later?
I’m going to try to do a better job of this in the future. Instead of planning out the perfect version of the project, I’m going to figure out what the bare minimum is, ship it, and then add the other stuff in smaller chunks after the initial launch. This is one of the great advantages indie startups have over our bigger competitors. They have to plan press releases, train thousands of employees, coordinate with partners, etc. The only thing stopping us from shipping something is ourselves.
We just hosted our second user conference. About 50 people came to our hometown of St. Louis and spent 3 days learning pro tips for our product.
I know this isn't a representative sample of our customers but it was great getting face-to-face feedback. I learned a lot about what they need, and they all left with an even better opinion of our product/company. I also had a chance to preview a new design we're working on and it was a relief that people seemed to like it.
Having said all that, planning events (even a relatively small one like this) is hard and expensive. We ended up losing money on the whole thing and it took a ton of time. Based on this experience, I think the argument for doing a user conference for a business like ours is that it's inspiring/motivating for our employees. I don't think there's any way we ever make money off this even considering second-order effects.
Less Annoying CRM just passed it's 10-year mark! It's been a long, slow trajectory to get here. For the first ~4 years, the co-founders worked other jobs on the side while building up enough customers to go full-time. In 2014 we moved from San Francisco to St. Louis and got our first real office and started hiring.
Now, we're at >21,000 paying users, 17 employees, and $2.5 million in annual revenue. Those numbers would have seemed absolutely unreal when we started, but we stuck with it for long enough that eventually it became a reality.
To celebrate, we recreated the dinner we had after hitting our first real milestone ever back in 2010. It was a great opportunity to stop and appreciate the journey we've all been on together. Now everyone is ready for the next 10 years!