11. Split test pricing early and often
Two years after launching, we doubled our pricing without an impact on churn or conversion. Since we grandfathered all of those users, we have two years of paid plans that could have been paying us $10 / month versus $5 / month. If we had done this split test earlier, we would have effectively doubled our revenue.
To visualize the impact, imagine a company with 1,000 paid customers:
$5 / month = $5,000 MRR (monthly recurring revenue) and $60,000 in ARR (annual recurring revenue).
$10 / month = $10,000 MRR and $120,000 in ARR
That could be the difference between succeeding and failing as a company.
12. Try to be profitable, at least once
I often meet with founders who tell me that they’re working on free user growth. I’m going to say something controversial: with rare, rare exceptions, you should never just focus on free user growth at the expense of revenue unless you’ve previously been profitable or run a profitable company. I don’t think most new founders know how to make the optimal tradeoff between free and paid user growth.
I remember having office hours with Emmett Shear. I explained that we were focusing on user growth, at the expense of revenue growth. He asked if our company would be harmed by focusing on revenue for six months? From that moment on, we started one of the biggest revenue ramps we’ve ever had.
If you’re not convinced, you should read this amazing article by Mark Suster on revenue.
13. Your number of paid plans will gets messy, and that’s ok
I remember being reluctant to split test pricing plans, since it’d produce more paid plans to support. Then, we did it. Sure, it’s extra work to support them, but it’s well worth it to double your revenue.
14. Prosumers have higher churn
Yep, and the difference is dramatic.
The only way for prosumers to potentially work is if they have an extremely high frequency of activity with your product – something they do so often, they see so much value, that they pay, like Evernote or Dropbox. Plus, there really needs to be a massive number of people that could use your software. However, that type of mass market prosumer software is few and far between.
15. The Dropbox referral page is amazing for Dropbox, but does it work for you?
Dropbox has an amazing referral page, where users can perform actions, like inviting friends in exchange for free storage. It’s been a big source of growth for them and I’ve seen a lot of other companies try it. Of all of the companies I’ve met, I’ve never heard of it becoming a meaningful source of growth.