When you’re looking for a new or your first subscription management software, you want value for your money – but in the subscription and billing sector, free or cheap does not always mean that you won’t pay in the long run.
Different software solutions will offer different pricing plans and models. There is not a single pricing benchmark since your requirements, your industry and your current setup can impact the implementation and onboarding efforts, potential customizations or specialized features as well as the overall scope of needed functionalities.
In the following, we will talk about the different pricing structures that “build” the pricing of most subscription management software.
We will also discuss how freemiums might sound like a good idea but can turn into a cost-trap or lack sufficient standards for local compliance requirements and finance standards.
Free software #
Especially startups and newly founded businesses prefer freemiums or free software to reduce costs, decrease any implementation efforts and test operations. Since most freemiums offer the basics without many additional features and functionalities, they can be implemented fairly fast and seem a good idea for basic subscription management.
However, free subscription management software should be a short-term option and depending on your location and requirements might lack compliance to process payments, invoices and sensitive customer data.
We had talks with customers who initially went with a free option and realized that this only increased the complexity since the freemium was not able to cover the basic requirements for recurring billing, invoice management and compliance.
A fixed subscription price #
A fixed price is the standard for most subscription management tools and can have a wide range depending on the scope of the software, the industry and the market. Most customers who are looking for their first subscription management software, might find it difficult to understand why one vendor has a fixed subscription price of 40€ while the other starts at 300€.
In most cases, the fixed subscription price is only one part of the overall cost. Some companies can offer a very low fixed price because they might add higher onboarding or service packages as well as very high usage-based fees for the amount of processed invoices, transactions, etc.
Stripe, for example, offers their base software for free and might therefore appear to be the cheapest version on the market, especially for companies that are just starting out. However, their fees for each transaction are fairly high and therefore can scale up fast if your business strategy aims for maximum growth.
Onboarding & service costs #
Onboarding and service costs are usually part of any subscription management platform that requires support to implement/integrate the solution, find the right setup and work on customization.
It can also include consultation services, especially if you’re just starting out with subscriptions and might want help to figure out the best practices for pricing, plans, etc.
Usually, onboarding and service costs are not fixed and visible on a pricing page, because they will be defined during evaluation meetings with you and the vendor. Make sure that any proposals come with a clear and transparent roadmap, so you know what you are paying for.
Usage-based pricing #
Outside of the most basic solutions, you will not find a subscription management software that does not include transaction-based fees (per transactions, per processed invoices, per annual revenue, etc.)
This is the price point that you need to study closely.
Make sure that both IT and finance are involved in this evaluation. Your finance team can calculate not only current but also predictable costs if you grow your business. Your IT can provide information how scaling might impact technological requirements, user seats, etc.
Before you sign the contract #
In the following, we will provide a few things to check and evaluate before you sign the contract.
Transparency over what you’re paying for
Make sure that you know exactly which features, options and customizations you are paying for. In case of a subscription billing software, this is especially true for compliance requirements for your billing (e.g. tax management, invoicing formats and content). Know which settings and features are add-ons or included in upgrades, so you start with the right setup for your requirements. This should be done at the very beginning of your evaluation.
Include your finance and legal teams to ensure that your billing setup has everything you need to be fully compliant and support your bookkeeping.
For example, as a European business you’re very likely required to send out invoices as PDF files. However, some American billing platforms only offer this option as an add-on.
Pricing levels & upgrades
I recently talked to our own CTO Martyn Arbon about how he usually selects and evaluates software. Martyn doesn’t just ask about the current price but also looks at upgrades, expected price increases as well as usage-based pricing levels. This way, he knows how any growth or increased need would impact the overall cost of the software.
In many cases, a company will subscribe to a plan for a specific amount of user seats or a specific usage level. Based on these set variables, the price will be aligned.
Fast forward a year or two, when the company wants to upgrade, add more user seats or process more transactions. Suddenly, the next pricing level is high enough to give the finance manager a headache.
At this point, vendor lock-in has set in: will the company pay the much higher price, or will it go through the arduous process of researching a new, cheaper solution and migrating to it? In most cases, routine and familiarity will beat the price shock.
Service level agreements
Service level agreements are not necessarily additional cost centers, but they will tell you what is included in the overall price and what would come as an extra cost.
Check your service level agreements in regard to:
- onboarding
- implementation
- customizations
- trainings
- as well as service availability
- service scope (updates, maintenance, bug fixes, etc.)
- service resources (e.g. 2 hours / week), etc.
Discounts
Everyone loves a discount and some discounts – for example for committing for a year or more – can save you a fair amount of money.
However, keep in mind that a discount is usually temporary or tied to certain parameters. Ask for clarity regarding the length of the discount, the eventual “full” price and potential limitations that come with the discount (e.g. fewer support resources, no flexible cancellation options, etc.).
Cancellation, late payments, downtime
It might not be fun to think about the worst-case scenarios before signing a contract, but it is crucial to consider what happens when the solution is down, when you’re late with your payments, or when you want to cancel your subscription.
Be aware what happens when:
- your payments are late: will there be fees or does the vendor lock your account?
- the solution is down (due to internal or external reasons): will you be reimbursed, how much downtime should be expected per your contract?
- you want to cancel: when do you have to terminate the contract, what happens afterwards, how long will your data be stored?
Migration options
As part of the cancellation questions, you should have an overview of the support you get if and when you want to migrate to a new/different solution. Some vendors will be very helpful to support data exports, handing over information to the new vendor, etc. Others might make it more difficult or will offer migration support only as an extra service at additional costs.
You should also ask ahead of time how long your data will be available, the possible formats of data exports and other important details to ensure that any future migration will run as smoothly as possible.
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At Frisbii, we take transparent pricing seriously. Together with you and your team, we’re happy to discuss your subscription management, billing and payment requirements, find the right solution and price setup and provide you with a full overview of our services and pricing plans, so you can make the right decision.
