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Annual subscriptions are great because they bring a bunch of immediate cash into your startup. This video walks you through what that looks like.
Be careful, though, because if you figure out how much money to raise from investors based on selling a bunch of annual subscriptions—and then you mostly sell monthly subscriptions—you won't have raised enough cash.
I am usually very conservative (10% or less) in my estimate of how many annual subscribers I'll get in the first year.
Also, the average monthly rate changes based on my percentage of monthly subscribers vs. my percentage of annual subscribers.
If I charge $100 per month and I have 100% monthly subscribers then my average monthly subscription is $100.
If I charge $1,000 per year and I have 100% annual subscribers then my average monthly subscription is $83 ($1,000 divided by 12 months). That's a lot less than $100 per month—but I get the money up front so it's worth it.
If I charge $100 per month or $1,000 per year and I have 10% annual subscribers, I average $98 per month per subscription.
In this video we walk through the math.
Check out this video for more info on deferred revenue for SaaS startups (annual vs. monthly subscriptions):
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Check out video 1 of SaaS / Subscription revenue:
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#startups #financials #SaaS #pitchdecks #impressinvestors
0:00 - Intro
0:05 - Time is the reason my subscription revenue math doesn't work
0:33 - Annual vs. monthly subscriptions
1:40 - Selling annual subscriptions gives us more cash!
2:24 - I recommend being conservative
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