Subscription fatigue is real amongst consumers. We’re living in a world where we pay for everything, but own nothing. From entertainment to software licenses.
Every time I visit Reddit and see new products promoted, you can bet there are always a few who mention that they’re not paying for another subscription.
Although listening to your audience and market sentiment is beneficial, I wouldn’t compromise on pricing that easily.
Most early SaaS founders have clear motivations when offering lifetime deals in the first place:
- Building up runway, so they can pay for server costs, development, and allocate a marketing budget
- Urge to find proof of traction, so they can crawl out of the pre-revenue pit
- Fear of rejection, thus, a one-time payment feels easier to sell
- Validation, because buyers can make you feel your service or product is in demand
The problem with this?
Lifetime deals are always short-lived, but can cause long-term side effects. What seems like a win today can turn into a financial disaster.
Sure, when you’re in an early stage of building a SaaS product, it’s tempting to promote your business with an LTD (lifetime deal). And you’re most likely convinced that it works, because other startups or solo founders have used the same page from this playbook.
An instant influx of revenue and a temporary boost in numbers are not a benchmark for future reference. And if you’re a first-time founder, I want to explain why lifetime deals are usually a bad idea for SaaS.
The fundamental problem with lifetime deals
I can say with the utmost conviction that lifetime deal buyers are rarely the customers you want and need long-term. Because I used the same strategy in my first SaaS product before, and it was a massacre.
SaaS companies are built on predictable recurring revenue. Without a subscription model, you can’t forecast your income, revenue, or strategically plan when to invest in growth.
Lifetime deals shatter that model entirely.
The most notable key points are:
- You trade future revenue for a one-time sale. When you sell a lifetime deal for $99, that’s the only $99 you will ever see from that customer. But the cost and resources to serve that customer don’t end. Your costs will soon surpass the revenue you earned, and you’re working for diminishing returns.
- They’re often the most demanding customers. LTD buyers have higher expectations and require every feature, which could alter the DNA of your business. They feel entitled to it because they’ve paid for it. And since they’ve paid once, there’s no financial incentive for them to leave, even if they’re a constant drain on your resources.
- You poison your future pricing perception. Once people know you’ve offered a $99-for-life plan, it’s hard to convince future customers to pay a monthly subscription fee. Your product becomes anchored in the market as a cheap one-time purchase.
- You undermine possible fundraising or acquisition. If your traction comes from one-time purchases and isn’t generating recurring revenue. Your valuation will take a big hit.
The biggest trap when selling lifetime deals in SaaS
Most new founders often underestimate the long-term growth in SaaS. The customer lifetime value (CLV) and customer acquisition cost (CAC) are often metrics ignored in the early stage. That’s like ignoring a skill like resiliency that could be the differentiator between success and startup failure.
They might reason that it’s better to get a thousand customers now at a $99 price and use the $99K to build the product with a future upsell. On paper, that might look fine when you’re stretched for cash and want to extend your runway, but what happens is:
- You’re selling to deal-hunters, and you can’t consider them long-term users
- They often reject upsells and upgrades, because of their “lifetime access”
- You’re burning through cash on development and overhead
- Your support expenses keep climbing when LTD users stay forever
- You’re struggling to attract subscription-based users because the product was offered as a lifetime deal in the past
The result?
You’re operating a SaaS business without subscriptions. And can you really call it a SaaS then?
The math why lifetime deals is unsustainable
Let’s create a theoretical example, and your B2C SaaS costs $5/month per user to host and support.
Customer lifetime value (CLV) can usually range between 12 to 48 months in traditional SaaS companies.
- Lifetime deal price offered: $99
- The average lifetime span per customer is three years (36 months)
- Your cost to serve: $5 x $36 = $180
You’re losing $81 per LTD customer at a minimum. That’s even before you count product improvements, marketing, and your salary.
If you were to multiply across hundreds or even thousands of LTD users, you’re in a permanent financial deficit.
Exceptions when you can offer lifetime deals
I’ve noticed a few companies, like Icedrive, offer both options. A lifetime deal or subscription.
And that’s been going on for years. But Icedrive is an established business, and they most likely have enough subscriptions to cover any deficit caused by one-time purchases.
If you’re still set on offering LTDs, plan strategically when building a business:
- Limit the LTDs to a small beta group
- Treat them as beta testers, not a main user base
- Add stricter terms to one-time purchases, such as 1 year of support and updates
However, it’s still a gamble, and if I were a first-time SaaS founder, I would alter my offerings with better alternatives.
- Offer a big annual plan discount, but keep your subscription model intact
- Offer a time-limited founders plan, where early adopters are grandfathered into future price hikes
- Go for the pre-sale route (crowdfunding) without compromising your long-term revenue structure
- Think about market segmentation, so you can offer low-cost plans to specific groups (students, non-profits, startups)
Final word
I’ve bought plenty of lifetime deals in the past, and the majority of those startups failed within the first 3 years. The lack of revenue and growth post-LTD sales was a major reason why failure was imminent.
First-time founders feel that lifetime deals are a lifeboat when bootstrapping, but more often, they’re an anchor that will drag you down.
Compromising on long-term sustainability is not an option. Once you attract the wrong type of customer, your startup will face challenges in sustaining future growth.
As a past startup SaaS founder myself, the one thing I learned is that aiming for profitable recurring revenue should be your only mission. It’s a foundation that allows you to move from growth to scale, hire others, and improve your product or service.
Early customers who bought an LTD aren’t going to grow with you, and they probably never will. That is the true hidden cost.
