Comments on: Pricing Web Services: Step 2 – No Annual Plans

By: Mike

Mike — Tue, 03 Oct 2006 17:39:00 +0000

That’s true stacey….in theory. The reality is cash in the bank is very different than “revenue” in your financial statements and churn is much harder to forecast with annual packages, and it has more impact…so what you have in your accounting reports can vary wildly from what you wind up collecting…and that lack of cash flow smoothness can be especially painful as you are getting started. On the flipside, financing your business through annual packages (i.e. more cash now) is attractive to many and has it’s own benefits…

By: Stacy

Stacy — Tue, 03 Oct 2006 14:55:43 +0000

“Monthly packages can derail your revenue reporting if you have a relatively high or low number of annual sign-ups in any given month. With monthly packages, these fluctuations and their effects are moderated.”

That’s only because you are using cash basis accounting. Accural based accounting will automatically match revenues with expenses and smooth things out. It gives you a better picture of what’s happening regardless of how you take in cash.

By: MikeInAZ

MikeInAZ — Mon, 02 Oct 2006 22:11:49 +0000

I agree. Also another factor is that many credit card merchant accounts don’t allow you (the merchant) to charge for future goods or services. So it’s not even an option for many.

By: Mike

Mike — Tue, 22 Aug 2006 16:14:30 +0000

True John…very true…much less benefit in terms of smoothness of cash flow, but if your monthly transaction size is less than $5/month, annual packages might be a better fit for you.

By: John Philip Green

John Philip Green — Sun, 06 Aug 2006 17:22:09 +0000

What about having just yearly pricing, like Flickr does? They have a $25/year Pro plan, and that’s it.

Also, in addition to the benefits of yearly pricing you mentioned, there is also reduced complication and expense because you don’t need to initiate monthly e-commerce transations.