Ask HN: Is offering a one-time payment stupid?

A one-time payment for an offline version.

I operate a low-cost SaaS that does about $500,000 a year. Churn is quite low, and LTV is about $250 per user.

Would it be totally stupid to offer a one-time purchase equal to LTV for an offline-only version of our application?

I’ve actually built my application local-first; it works offline just fine. My business model is SaaS because it’s easy and we do have online-only features, but I wonder if a dual model would get more money on the table? Many users have emailed us asking for a one-time, offline option.

Does a dual model work? SaaS for app + online features, and a one-time payment option for offline usage and one year of updates?

Thoughts?

10 points

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bigscrankus

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2 days ago

36 comments

tinthedev ・ a day ago

I think you're thinking of it a bit backwards.

Why limit your price to LTV for the offline-only version? Think of it as a full blooded product, instead of trying to squeeze it into the SaaS thinking model you've got already.

Plenty of enterprise (and such) clients wouldn't balk at all at a $500 fee. Brainstorm your target market and price accordingly. In other comments, you're mentioning the support burden - I don't think you should sell the offline version if you're not ready to lift that burden, and thus should price it in a way where this is attractive to you.

Offline versions are usually used by more demanding customers in the current day and age - the web is where you go for the user-friendly version.

  • bigscrankus ・ a day ago

    I’m certainly open to charging more, but I operate in a price sensitive hobby market. If we do go for it, I’ll definitely try a higher price first. No harm in trying.

    • tinthedev ・ a day ago

      You can always try to categorize your target audience, and figure out their preferences.

      The main thing to focus on here, however, is that this offering would not be for your usual audience. If that's all you expect from it, I would rather not bother. It's a separate market, and while there's some bleedover, I think you'll be surprised how different they are.

      You can always try to play it safe and put in a contact form for discounted quotes (nonprofits, individuals, etc). This depends a lot on your capacities, but it could quickly tell you if you're pricing out desirable customers.

PaulHoule ・ 2 days ago

As a customer I wonder about it. For a service like Plex Pass buying a perpetual subscription seems reasonable and affordable but if I am paying $X a month I can "exit" and the vendor might care

https://en.wikipedia.org/wiki/Exit,_Voice,_and_Loyalty

but if I've bought a perpetual subscription they've got no reason to listen to me anymore.

  • bigscrankus ・ 2 days ago

    This is a benefit of our current SaaS-only model I tout to my community.

    But, most don’t care about such things. ;)

JohnFen ・ 2 days ago

In terms of the larger market, I have no idea. However, I avoid SaaS things, and I won't go for software "subscriptions", so unless your product offers the ability to pay a single fee and run it on my own machines, I wouldn't be your customer.

  • bigscrankus ・ 2 days ago

    Yes, you and many others remind me of this in my email inbox every day.

    It doesn’t change the fact that software is expensive to maintain and even relatively simple apps can cost millions of dollars in human-hours to support. SaaS is the safest path to that, and if users don’t want to pay a premium (>$200ish, in my case) for offline, SaaS will stay that way.

    • JohnFen ・ a day ago

      I'm not arguing that SaaS is good or bad, just that it isn't for me. You were asking if you're leaving money on the table by not offering a non-Saas, non-subscription plan and I was just saying yes, you are. I don't know if the amount of money is worth it for you, though. Only you can determine that.

      • bigscrankus ・ 15 hours ago

        Appreciate it! Apologies for sounding snarky; traveling and very jet lagged.

  • scarface_74 ・ 9 hours ago

    And honestly you’re an outlier - Microsoft and Adobe make money hand over fist in subscriptions.

    I gladly pay $129 a year for 5 users of MS office and each user can use the software on multiple platforms and have 1TB of storage

speedylight ・ a day ago

I think you could get away with offering a one time payment if you restrict the time you’d supporting your software with updates.

So for example you have X Program that has a one time license which costs $100, you promise to keep updating X Program for let’s say 3 years… after that time passes, those people could keep using your program but they wouldn’t receive any updates without paying some sort of upgrade fee or you could choose not offer one at all if you’re looking for a clean exit.

csomar ・ a day ago

Unless your users (and potential real users) want it in significant numbers, there is no way to do it that way. You already have low churn. The reason you might want to do it if your churn was high and you want to guarantee that income. That is not your case here.

n9com ・ 2 days ago

Yes, it can work. You should test it out. However from experience, getting customers on a subscription is normally better, especially if you're looking for an exit in the future.

  • bigscrankus ・ 2 days ago

    Yes, SaaS is nice and safe. I’ve run it as a SaaS for 4 years now. However, I wonder if I’m leaving money on the table by not offering other monetization options.

muzani ・ a day ago

Don't eat unicorn food if you're not a unicorn. Here's a litmus test - do you think $5 million is a lot of money?

If yes, then do it. Whatever gets you to $5 mil the fastest.

If no, then don't do it. You'll run out of customers to milk and not be sustainable.

  • HenryBemis ・ a day ago

    Or.. to counter that. How many people are working there, and how many people own that company? What is your 5-10-50 year strategy? Get a $20k salary per month till the end of time and live a long happy life, or sell it to GigaCompany for $1bn and go buy an island and retire at the sweet age of <insert_your_age>? Do you plan to expand? Milking the customers for as much as you can is a great(?) idea, but risking your customer base "because I want to go from $100k salary per month to $101k salary per month" is reckless imho.

    • muzani ・ 17 hours ago

      Selling for a fixed price has worked for decades. Microsoft did it. They made money, used the money to make new products. Early cash is good.

      The whole SaaS ARR model was popularized by VCs because it's easy to calculate and a healthy indicator of exit size.

      The logic falls apart if you're not VC-backed – there's no guarantee that 5 years from now, customers won't switch to the competitor that has $100m in funding.

      Also by playing the one time purchase model, you're pricing it below what the big guys can sustain. You strip mine the market from the competitor, while offering the customer a good(?) deal.

      It opens up some markets too. I used to sell SaaS to construction projects, and they preferred to make a single purchase far higher than LTV because it's easier to get the budget approved and "own" the system.

      • bruce511 ・ 10 hours ago

        I'll counterpoint somewhat.

        Our business started by "selling copies". We are bootstrapped not VC (or otherwise) funded. We started with one person and grew.

        Around 2010 we were becoming victims of our own success. As the existing customer base grew, sales had to grow to pay for ever-larger support staff. Not to mention ongoing development costs.

        Yes we charged for upgrades. Yes we charged for some support (some companies were on contract, others were ad-hoc) but upgrades and contracts were optional, ad-hoc was an admin pain.

        We switched in 2011 to a SaaS model. Under this model we are sustainable even if new sales drop to 0. Which means existing customers are funded from existing customers. Since support is now directly funded, it can be scaled up as customer numbers grow.

        I should mention, we are in the Business not Consumer space - support is a big part of what we offer.

        We stopped selling a "one time pay" option. We do let people self-host or we can host for them.

        Yes, there are likely some number of possible customers who won't buy because of our model. For us that's OK. We don't need 100% of the market. What we need is to serve the customers we do have, while growing in a sustainable way. We cannot be dependent on "new sales" in order to keep the lights on.

        What is interesting is that because it's funded, our support is the best in our industry. We pick up customers from competition because of our support reputation.

        But of course each market, context, product is different. YMMV.

      • HenryBemis ・ 16 hours ago
        ・ 2 more

        There are a lot of moving parts to your reality and my question. If you are flying solo, already banked $10m from this thing, you can sell it for $10 and never go hungry and your kids (if you got don't know/I'm not asking) will also be set for life.

        As a user (again, I may be a cheap bastard) I love a "pay once - have forever". I assume your SaaS is not for commercial/business use, you mention "price sensitive hobby market". If you price the 'runs offline' at $10, good luck to your competition to beat you.

        Also, if your market penetration is steady and linear at 0.5% per month, and you are just on the first 5%, then that's a different timeline/decision process.

        There are so many thoughts I got for this (as an 'internal/me mental exercise'). I hope it all plays out well for you, and you decide what's best for you and your business :)

        Thank you for responding and giving me that POV.

        • bigscrankus ・ 15 hours ago

          The app has made 1.4 million dollars over 5 years. So a solid salary. Nothing near financial escape velocity, but I’m grateful for the freedom.

duxup ・ 2 days ago

Are they going to host / manage the application / whole stack?

  • bigscrankus ・ 2 days ago

    No; just the application itself. I’m not interested in running an open source project or teaching people how to run our server-side data sync stack. At ~$250, even just a tiny bit of high-expertise tech support for those users would put me underwater.

    • duxup ・ a day ago

      DB?

      I'd be very wary of these clients who don't / haven't managed an application eating your profits with support questions and etc.

      A lot of places imagine "boy i hate subscriptions, wish I could just pay for it" but they forgot how much work IT / managing servers, updates, and applications are ...

toomuchtodo ・ 2 days ago

I think it’s reasonable as long as your customers know upfront that support is time bound (X years) and major releases might incur additional future cost.

  • bigscrankus ・ 2 days ago

    This is one concern I have: SaaS is actually a really simple business model. “Pay this month, use this month”.

    Introducing things like “pay one time for perpetual offline use and a year of upgrades from the date of purchase, OR pay this month use this month.” Doesn’t roll off the tongue quite as well. Maybe bad UX from a pricing perspective.

    • toomuchtodo ・ 2 days ago

      At the end of the day, as an enterprise, you have a target financial outcome: some combination of target income and profit. If a cohort of customer is willing to spend assuming a one time payment model, and you can successfully manage expectations for those customers (while minimizing the burden of doing so), it is reasonable imho. The pitfalls are customer unhappiness and the economics performing suboptimal compared to your forecasts (they become a support or engineering burden because they feel entitled to it outside of the previously agreed upon scope).

      Maybe don’t offer it publicly, but test it with a a customer or two who really wants it to see what the experiment shows. Wishing you a successful experiment.

      • bigscrankus ・ 2 days ago

        Yeah I think some limited testing is in order. Appreciate the insight.

apothegm ・ 2 days ago

One potential risk is that only the users who are above average in LTV might choose that option.

  • bigscrankus ・ 2 days ago

    That’s true; it could be the most valuable users that switch to the OTP if they aren’t getting value from the online features.

    It’s been a while since I’ve surveyed, but the last time we asked, only 40% of our surveyed userbase thought the online features were valuable to them.

FlopV ・ 2 days ago

Maybe it would be a good offering when a user is going to churn ?

maynkal ・ a day ago

Personally, if you are developing a micro-niche SaaS that doesn't have any entry barrier, then you must go with a one-time payment. Because you don't have any competitive advantage, any competitor can come build a similar app and attract your customer, so the customer who is paying monthly to you will switch to your competitor. I hope you understand my point.

  • bruce511 ・ 10 hours ago

    ... whereas for one-time customers you hope they'll switch to a competitor.

    I mean, you've been paid, what do you care if they stay or go? In fact "going" is cheaper for you.

    The best meta argument for SaaS is that it keeps supplier and customer incentives aligned. I want you to hang around another month so I'm incentivised to keep standards high - to keep improving the offering and support.

    By contrast a truly one-time offering means the customer has 0 value after the sale. That money is quickly spent. So there's less money for development or support. I am only interested in new sales so I optimize for that. My incentives are not aligned with existing customers.

    Now, context matters. The model has to be correct for the product, the supplier, the consumer. I don't pay SaaS for my text editor, or my OS etc. I also don't need support from those providers. YMMV.

paulcole ・ 20 hours ago

> > LTV is about $250 per user.

How stable is this number? If it's still trending up, I wouldn't make any drastic changes.

HenryBemis ・ a day ago

If I may suggest Steve Gibson's method, Spinrite. One-time purchase. I bought it once. It 'lives' on a usb-stick, offline.

If I lose it I can download it again.

I bought it at v4.x or v5.x (I don't remember, it's been years).

I've paid for the upgrade to 6.0. The upgrade from 6.0 to 6.1 was free (and very significant).

When he moves it to v7, I will happily pay for that upgrade as well.

I don't know if I am a cheap bastard (perhaps I am) but I prefer to pay-it forward. I buy a 'lifetime' subscription for the things I want _a lot_ and/or need. I remember a decade ago I paid $200 for a SaaS when the monthly rate was $20. I use it a few times per year (so let's say it would cost me $40 to reactive-use-deactivate). I got the lifetime at 10x, I broken even after 4-5 years. I paid the folks 10x when they needed the funding (and offered the 'lifetime'), and they 'thank' me by having me on 'for free'.

That said, I did take the risk, because if that SaaS was dishonest or simply they would have gone bust, I'd lose the 90% of that payment, but the amount was small ($200 for a lifetime service is a small amount for an EU costs/standard of living).