Software Subscriptions (SAAS products) are a major expense for many (if not most) business owners. And it’s no longer just one or two subscriptions – most businesses now have 10 or more active software subscriptions. And prices can be really expensive – I’ve got one that costs us around $1000 a month!
Most offer different pricing and payment plans, and many offer the choice between monthly payments and annual payments. There can be considerable savings by paying the subscription annually instead of monthly. But not all savings are really worth it.
Here are my top 10 tips to managing your SAAS subscriptions.
Know what you want before you start
TIP 1: Research the product prior to starting your trial
Most products have numerous webinars, demos and youtube videos available (not always from the actual provider – which is good because they will say things from a real user’s point of view rather than the marketing team’s point of view!).
TIP 2: Write a list of requirements
It’s really important to know what problem you are trying to solve with this product. If you are using an existing product and you are looking for a replacement write a detailed pros and cons list of the current product. It’s so easy to get wowed by the bells and whistles of the new candidate and then start moving over to it before realizing that it doesn’t do something that the old product did that you can’t live without. Realize that no product will meet 100% of your needs – if you can find 90% in a single product then you’re doing really well.
Take advantage of the free trial period
TIP 3: Schedule time to do a decent trial
I can’t tell you how many times I have signed up for a free trial and then not touched the product again. When you sign up for a trial make sure that you have the time to properly evaluate the product. This will usually take a minimum of two hours, but could take a couple of days for a more complex product. Allocate time in your calendar to do this work as soon as you start the trial. If you don’t have time to do that immediately, don’t start the free trial. Many now only offer a 7 day trial, so no lollygagging!
TIP 4: Use multiple trial periods
Some products will extend your trial period if you ask. But they usually won’t do it more than once. Another hack is to use a temporary email address when you start a free trial to allow you to get multiple free trial periods. You should be willing to trash this account at the end of your trial if you have to (or change the login address) and this won’t work if you use the sign in using google (or similar) services. If you use google as your business email provider you can create an alias email address in your gmail console. You can also create dynamic extension addresses by adding a + after your email name and a phrase (e.g., jack+test1@frost.com) and google will deliver this to you with a tag for test1, but most systems will accept this as a unique email address. Another hack in gmail is to insert periods within your email address (e.g., if your email is jackfrost@gmail.com you can also use jack.frost@gmail.com and it will get delivered to you).
TIP 5: Don’t give a credit card when you sign up for the trial
Not all products require you to enter a credit card number when you start the trial. If they don’t require it, don’t enter one! This means that when your free trial period ends you won’t automatically be converted to a paid account, as most do.
TIP 6: Use a virtual credit card
If you do have to enter a credit card number at sign-up, use a virtual credit card where you can suspend it or set a really low credit limit (like $1 – so that it will pass most authorization checks but never any actual charges). This way if they do try to automatically charge your card it won’t go through. Some banks offer virtual cards, as well as many payment companies (like OnPay), virtual banks (like Relay Bank) and payment services (like wise.com). Change the card to a normal one when you are ready to pay.
If you don’t have the option to use a virtual card, then you should set a calendar reminder 1 day before the expiration date of your trial to delete the trial account if you are not 100% sure you want to proceed.
Don’t Commit to Annual Subscriptions (at first)
Unfortunately it is becoming more common for SAAS products to only offer an annual subscription only, or as the default setting. It can be hidden in the fine print. If you see something like “$99 per month (paid annually)” then you know it’s really an annual subscription, not a monthly one. Annual subscriptions are paid up front and are usually non-refundable.
TIP 7: Start with the monthly subscription even it is more expensive
Many products offer a discount if you pay annually rather than monthly – sometimes as much as 35% – so it really can be worth it to do the annual subscription. But if you are still testing out this product why pay for a full year unless you are 100% committed to using this product for the full year. Instead, start out with the monthly subscription and only convert to annual when you know for sure that you want to continue using it indefinitely. My personal rule is that an annual subscription must save me more than 10% over the monthly subscription to be worth it. I’m willing to pay a little bit more for stable cash flow (but not a lot more).
TIP 8: Stagger your annual subscriptions over the year
If you followed tip 7 and only signed up for a monthly subscription you can choose when to convert to annual. Look at all your annual subscriptions and convert to annual subscription in a month when you have no other annual subscriptions renewing. Also look at your seasonality – if you have a slow season, then don’t have any annual subscriptions renewing in those months, save your cash then and only renew in your high cash-flow months.
Don’t let subscriptions get out of control
TIP 9: Organize your accounting system
Make sure that you are coding your software subscriptions to easily identifiable accounts that only contain software subscriptions. We’ve seen clients code software subscriptions to all sorts of accounts, including Office Expenses, General Expenses, Computer Expenses, Advertising, Books and Subscriptions, Accounting, and more. Stop that! Just stop that! Create an account just for Software subscriptions and code all of them there. You may have a few accounts, but make sure that they are only used for software subscriptions. Here are some suggestions:
- SAAS Subscriptions – for all subscriptions that don’t fall into any other category
- Client Subscriptions (Cost of Goods Sold) – if you pay for subscriptions that you on charge to your clients
- Marketing SAAS Subscriptions – especially if you are an ecommerce business, you may have a high level of marketing related SAAS products. Separating these from your other SAAS products can be useful.
The key here is to have your SAAS subscription expenses separated from your other expenses so that you can monitor them. If you lump them with other expenses they will never be visible.
TIP 10: Audit your subscriptions quarterly
Start off by exporting your relevant accounting ledger accounts for the past 12 months, then sort and subtotal by vendor. Now you can see all the subscriptions that you are paying for. Put them into a 12 month spreadsheet so that you can see the real costs over the year. Look to see which ones can be converted to annual and when makes the most sense to do this (see tip 8 above).
Every quarter you should print out this report and compare it to your spreadsheet. Ask the following questions regularly:
- What subscriptions am I no longer using?
- What subscriptions are giving me grief? Maybe there are better or cheaper tools available now.
- Can I convert a monthly subscription to annual to save money?
- What would it cost me (time and stress) if I canceled this subscription?
- Is there a cheaper edition I could be using? What would I lose if I downgraded?
