You need to do lifetime deals if you're just starting out

[miles77]

A lot of founders are anti-lifetime deals.

They don't think it's a sustainable business model, or their egos are too big to "support a bunch of non-paying users for life."

But here's the thing: lifetime deals (LTD) is not a business model.

Rather it's a funding model.

LTD is a funding model, not a business model​

Your customers pay upfront for your software in its nascent state because they want to invest in you and your product.

They give you cash upfront and ample feedback to get you to product-market fit.

In return, you'll take care of them for the lifetime of your company.

That's it, that's the model.

Is it a good funding model?​

Hell yeah, it gives you badly-needed liquidity upfront so you can invest in product development.

It's superior to investor funding because:

1. You keep 100% equity (no parasites riding your coattails); and
2. Their feedback is actually relevant, since they're your users/customers.

Indies who are stubborn about LTD don't get very far in their bootstrapping.

You have to be pragmatic if you want to live to fight another day.

Get cash upfront whatever way you can, ideally without investors.

And revenue is the best funding source (even LTD revenue) because it validates your offer.

What's the downside of LTD?​

Well you're "on the hook" for the rest of your life supporting a bunch of non-paying users.

But is that such a bad thing?

Don't be ungrateful, these are the people who believed in you and paid upfront for an LTD when your app was total shite.

Here are 4 things to keep in mind:

1. The marginal cost of serving each LTD user is near-zero. Your servers are running anyway, you're paying for hosting regardless.
2. Use churn is very high in LTD users. When people aren't paying monthly, there's no urgency to use it. So all the fears about LTD users overloading support are overblown.
3. Don't forget LTD users have high net promoter score -- these are the people who will become your best advocates, your biggest affiliates, they write reviews, make videos, and spread the word about you.
4. If your product has baked-in viral loop, these LTD users are free marketers for you, similar to freemium users, except they're actually paying for it.

Pour conclure​

Maybe it's just me, but I don't see any downside of doing an LTD as a funding model at all.

I've debunked every single criticism levelled against LTD.

And it's untrue that one-time payments don't have repeatability.

Don't forget the VAST majority of businesses in the world rely on one-time payments.

You can use it as a funding model, a business model, or both.

Don't worry about LTD cannibalizing your company valuation and all these other pie-in-the-sky things, survive first.

Then cross that bridge when you get there in the future.

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I'm also currently running a LTD promotion for my product Zylvie, here:

https://zylvie.com/deals/p/kenmoo

 

[sf3612]

@miles77 In my eyes, LTDs should cover the expenses the users will make for the next 12-24 months so at worst you're at net 0(or maybe slightly below 0 but not more than half month worth of salary).

Also, if the dev find a way to have 0 or very low cost of managing/sustaining things, then LTD is literally free money in the bag. Instead 1year+ revenue just like that and you dont have to keep the users hooked for 10+ months to receive the same amount.

And just as you said, early LTD users are the most important as they're the ones validating your idea, help with improvement/polishing(early access, testing, bug reports, suggestions, etc) and will probably be the most important asset for the first year anyway.

As someone who just finished a feature and planning to release it as a SaaS + LTD option, i genuinely hope to get as many LTDs as possible initially

 

[love4truth]

@miles77 Thanks for sharing! I've been on the fence about LTD my B2C product I've been working on and I think you answered most of the objections I had in my head. I think I'm going to do it - great post!

 

[themagicman]

@miles77 Having run one SaaS company for 1.5 years, LTD is a very good idea. Deals closes sooner, money hits the account sooner, there is less distraction due to feature requests and no fear of churn. In the start, you are looking for logos and money. But be wary of dealing with big-ticket clients, they will screw your product roadmap. My company had to shut down because of this reason.

 

[miles77]

@themagicman

But be wary of dealing with big-ticket clients, they will screw your product roadmap.

Very true.

I can imagine how demanding they can be and how far they would force you to stray from your original roadmap just to serve them specifically.

 

[nana48]

@miles77 Every SaaS entrepreuner should understand a few key metrics and their relations... Let's talk about a few of them:

• Churn (customer, revenue)
• ARPU & ARPPU
• LTV aka Customer lifetime value (calculated from ARPU/ARPPU and Churn)
• CAC aka Customer acquisition cost
• COGS aka Cost of goods and services

Let's assume that your business is viable and thus LTV > CAC + COGS. As long as your LTD > LTV, you are, on average, earning more with the lifetime deal.

However...

You can't reasonably estimate LTV in early stages. And, you want to grow LTV over time by maintaining high retention and increasing ARPU/ARPPU (with upselling, rising prices, etc.).

So... do your math before considering LTD...

 

[miles77]

@nana48 Don't be too rigid with metrics.

Yes, LTD > LTV is a good idea, but LTDs can be treated as a marketing cost.

Why? Because these users spread the word.

They write reviews, make videos, share it in FB LTD groups, and, if your product is front-facing, you get free backlink juice too.

 

[nana48]

@miles77 That's just an assumption. There is no reason why LTD users should be more loyal than happy users with subscription. And vice versa, there is no reason why LTD users should be a marketing machine.

Of course, I expect that you don't have to review or make video to get lifetime deal. I expect it to be a normal pricing strategy.

If LTD is only available for a specific action, there is no reason to stop looking at metrics! It's covered by CAC.

Even if you are using LTD as a funding strategy, you should be aware of what it means for your business in the long-term and metrics are essential for that. As with any investment, you are giving something away in exchange for money.

If your cost per user is near zero, it may not look important, but you should still deeply understand the effects of your pricing strategy. As soon as your cost per user is non-negligible, you should rather think even more about it.

There's one thing often overlooked by small businesses... the time of founder or founding team. You spend countless hours promoting your business... and it makes it a real cost of running the business.

 

[miles77]

@nana48 Not an assumption.

LTD customers have a higher NPS compared to MRR customers.

You must have not run a lifetime deal before or even talked to founders who have done it.

In my experience, MRR customers pay monthly because it's a necessary evil, they're not exactly happy about it, and it will reflect in their overall enthusiasm for your product -- at least in comparison to LTD customers who almost always feel like they've gotten an amazing deal.

 

[nana48]

@miles77 That's just another assumption...

1. I have vast experience with TLD from multiple companies and multiple different products. I sold mobile apps, ran a development agency, ran multiple SaaS's... and I even worked in B2G sales and TLD was kind of a necessary evil for us to offer due to how those deals are structured.
2. Initially, people loved our TLD more because it was incredibly cheap (because we were stupid back then and didn't understand the metrics!). Later, they didn't love it that much if the price was fair for us, too.
3. User loyalty is not built by your pricing model but by your product, customer service, etc.
4. MRR customers are not unhappy because of monthly payments. And they are completely willing to support you, give reviews and spread the word if your product is actually really helping them. We pay for numerous tools that are worth it.
5. Of course, LTD customers can sometimes have higher NPS scores because many companies simply don't understand metrics and their LTD is way too cheap for building sustainable business. And, of course, such customers feel like getting an amazing deal. They do! And you pay for it... which is okay if it's a part of your calculated strategy.
6. I'm in business for 20 years... how many subscriptions and TLDs have you sold? For how many different businesses and industries?

Btw, I'm not against LTD. It's completely valid business model and sometimes, you don't have any other option.

I just said that many founders don't do the math to build a working business model in the long term. And I'm not really convince that I should not watch metrics just because LTD users are more likely (which is just an assumption not based on my actual situation) to write about me somewhere (which I could purchase too and maybe more cheaply).

 

[miles77]

@nana48 Okay, you won the dick-measuring contest.

 

[nana48]

@miles77 Oh my... It wasn't contest. You wrapped it nicely, but just forgot that there are also numbers behind. A lot of startups forgot about numbers. That's the only thing I wanted to point out.

 

[miles77]

@nana48 Fair enough.

You brought up great points about metrics.

 

[funkybeat]

@miles77 agreed.

 

[miles77]

@funkybeat As you can see, you and I are in the minority!

 

[levs_28]

@miles77 This is such a brainless post. You do realize that you can’t LTD every business right? Especially when you don’t even know what pricing works for you yet sometimes, you’re just going to be on the hook for life to someone? What if your product is high end and costs a lot to run more than just servers, you going to eat that cost forever for some lumpsum at the start when you don’t even know if its enough? Why do you feel sharing this post is of value to you, or anyone else?

 

[miles77]

@levs_28 Try expressing yourself without starting with an insult next time.

Nobody is going to read all that drivel that comes after.

 

[levs_28]

@miles77 Bro u fucking blow. Shut your mangy broke ass up pissant animal