Ask HN: Do you have a yearly plan for your SaaS app? | Hacker News Reader

Ask HN: Do you have a yearly plan for your SaaS app?

5 pointsfookyong3 comments

Just curious about this one.

I ran a yearly plan test for a month. My findings were that this actually made for fewer conversions on the plans page, I assume because of the paradox of choice - people didn't know what to go for (the yearly plan was much better value than the monthly plan) and simply gave up trying to choose.

So I got rid of the yearly plan.

The irony of course is that the handful of customers who did choose the yearly plan actually contributed to one of my best months in terms of revenue.

Has anyone run tests like this? What were your findings?

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The irony of course is that the handful of customers who did choose the yearly plan actually contributed to one of my best months in terms of revenue

I'm not an accountant, but you should recognize that revenue over the life of the subscription, not all in one month. The revenue you collect from a client signing up for a year's worth of service will have to pay for 12 months of expenses that the client generates, plus a reserve fund to pay for refunds, etc.

Take the example of a web hosting reseller with a $20/mo plan or $200/year. Each client costs $10/mo (bandwidth, storage, maintenance, support). If I get a client on the annual plan, I can't count that $200 as "money in the bank" because I'll have to consider that $10/mo in expenses ($120), plus the possibility that he'll request a refund after 3 months.

The solution is to collect the $200 now but recognize it in $16.67 monthly increments for the life of the annual subscription.

true, and as as an accounting major I should know better (sadly I spent all my time playing Counterstrike instead of studying).

your example is sound, but using it as a model I guess my question is how do you weigh up what is more important:

1) Guaranteed 12x $16.67 payments over a year or 2) Monthly $20 payments where the customer can cancel at any time

This is the kind of thing that attrition / churn rates can help answer but - as is the case with many apps here I think - it's still early days and we just don't have reliable data for that kind of thing with only 2 or 3 months of operations under our belts.

How long did you run the test for? The reason I ask is I pay monthly for backpack (37signals) and after 4 months I'm considering a yearly plan. 37signals offer a lump sum option which to me is an even better option.

tl;dr: New signups may like the yearly plan after a few months, and lump sum payments (maby with varied discounts) may be something to consider.

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