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- ❌ Double Prices, 🤑 Double Revenue, Thank Me Later!
❌ Double Prices, 🤑 Double Revenue, Thank Me Later!
Pricing is hard, and in my experience first time founders always underprice. My hot take on pricing!
Lundin Matthews
June 06, 2023
The Story
Four years ago when starting my first SAAS we initially priced the product as a donation only software company for the first 6 months. I was an idealist and thought that I wanted to build a company that asked users to pay what they could afford or what they felt the value they got from the product was worth. Well after 6 months we were did exactly $0 from our “Buy Me Coffee” link.
After some long hard thinking, two days, on the subject matter I had determined that the product should be priced at $4.99 a month, there was no reason behind this magic number just what I felt like I was worth at the time, and were where off to the races we signed up around 100 users at this pricing as we removed features and access from the free tier. This was a huge headache for us at the time and I definitely remember some “customers” at the time sending me hate mail directly in my inbox. Looking back those people were never going to buy so I shouldn’t have put any weight to their thoughts, but it was hard for me since I was an idealist who wanted to make the software pay what you want but that wasn’t buying my kids groceries.
Building a saas is like planting a fruit tree, the first few years are the hardest and produce the fewest rewards. Not everything has to be a hockey stick growth and most things in life are slow and steady.
— Lundin Matthews (@lundin_matthews)
2:21 PM • Mar 17, 2023
I now had a SAAS that was making ramen profits, I could buy groceries for the month but if we had any family emergencies we would have gone down in flames. So I raised prices again about two years into the business, this time by introducing a higher tier plan at $19.99 a month, and raised pricing of our lowest plan to $7.99 a month. Coupled this by giving a two month discount for users that paid a year upfront as I needed the cash! This plan was working well and the company started making around 5K MRR a month off a single Google Sheet Add-on. The only problem was now I was starting to do the math on how many subscriptions I would need to sell to make ends meet and hire some help it wasn’t looking good.
One month after these latest pricing changes the realization that I would need to update the pricing again and this time I knew I had to go much larger. I introduced a four tier pricing plan based on the size of the customer. $400, $800, $1200, & $1500. This new pricing helped lead the way for stabilizing my family & growing the company. Today four tier pricing plan is in place but we have raised pricing yet again to keep up with inflation.
The Lesson
Double your prices, if sales don’t stop, double them again. The moral of the story is to not underestimate the value your providing the customers. Anytime we double prices what I like to tell my team is lets watch the sales velocity even if we see half the signups the overall cost for us will be less given the required support, and server load. Your worth more than some influencer in the value that you provide to your customers so make sure price it that way. Finding 100 loyal customers willing to pay you 10K a month is just as hard as trying to find 10K customers willing to pay you $100 a month, but both are how you get to one million in ARR.
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