6. Being too cheap or free can lead to less growth
It turns out that distributing to businesses takes money and effort. They don’t just show up. Since we had cheaper plans, we couldn’t afford to reach out to more customers. But, with more expensive plans and a higher LTV, we can spend significantly more to acquire customers.
Being “cheaper” and “better” really just makes it so you can access less people.
7. There isn’t a strong correlation between beautiful design and success (in the early days)
Let me preface this by saying, we love design. I’m a huge fan of design and we’re making a big investment now (HelloSign Unveils a Cleaner, Simpler UI to Empower Users). I think it’ll help us get to the next level.
I remember meeting with Garry Tan, who is an incredible designer. He mentioned that he hasn’t seen a strong correlation between good design and success of startup companies. So, if you have to choose, pick great user experience, then add great design later.
Conversely, focusing on pixel perfection in the early days may even prevent you from getting the revenue you need.
8. Free plans often make business leads feel uncomfortable
A huge customer wanted to use us for thousands of seats. Instead of being excited by our free plans, they just got confused. We lost them. That was painful. Not paying means that you may not be around forever. Paying money for software signals that they can depend on you for this really important function in the future.
Startups underprice all the time. As a business, we signed up for a $15 / month tool. I would have paid $100 / month for the value it provided. I had an unusual moment, where instead of getting excited about how inexpensive it was, I got nervous about using a key piece of software for only $15 / month.
9. Don’t listen (too much) to your users on pricing
Innovate on your product, not the pricing. We’ve tried all types of innovative pricing models, often driven by our user base, which have resulted in a lot of custom development. Ironically, when we switched back to industry standard pricing, the plans performed significantly better.
10. $5 / month is too cheap
If you’re a business tool and charge $5 / month, you’re likely leaving a lot of money on the table.
Justin Kan said that we were running a charity. He was right. We doubled our prices. See #9.