Should You Run A Lifetime Deal?

0:00Davis Baer launched Uform using a $299 lifetime deal. He and his co-founder made about $30,000 in the first few months, and it actually turned into a viable business. So, a bunch of other founders or indie hackers saw that, and they thought, "Well, this is easy. I'm going to do the same thing." Two years later, pretty much all of those copycats have shut down, while Uform is doing more than $200,000 in ARR. I've invested in more than 240 SaaS companies and chatted with thousands of founders over the last 21

0:30years. [music] And my default advice is don't do lifetime deals. Is it possible to make one successful? Obviously. [music] Is it probable and should you do it? Probably not. So, today I want to break down why lifetime deals are so tempting, why they're almost always the wrong move, and what has to be true for one to work like it did for Davis. To get started, you got to realize what a

0:51lifetime deal actually signs you up for. So, if you strip away the marketing, a lifetime deal is really a free plan with cash up front. That's the whole thing. Someone pays you once and you support them forever. Now, I want you to think about that word, forever. It's a word most people skip past, right? This is not for a year, this is not until your

1:09next major version, this is forever. This means you've taken the entire lifetime value of your customer and you've traded it for a single transaction. So, say your product is $30 a month and a good customer sticks around for 2 years. That's $720 of lifetime value. Well, you may have just sold that for $299, and you sold it to the segment of the market that is the most price sensitive, which is not usually the segment that turns into your best customers. So, the math may feel like it looks good, but it really only looks good on the day the money lands, cuz every month after that, it gets worse. I do understand the

1:42appeal. Recurring revenue is such a slog, and most founders reach for this to try to to get ahead, either to get money in the bank so that they can keep bootstrapping, or just to build their confidence that this is maybe a viable idea. Because if you work for weeks or months and you land three $29 customers, you have $87 a month, $87 of MRR. It can be really demotivating to do that much work for that little revenue. And you can start wondering if the whole thing was a mistake. But if you do lifetime deals and you get some attention, you promote it. Let's say you can make

2:16$5,000 in a week or $10,000 in a week. And that can really make you feel like something's happening. But you might be trading short-term satisfaction for what in the long term can be a real pain. Because what's actually going on underneath this decision is that you're avoiding [snorts] pricing your product correctly. And you're avoiding selling a subscription. A lifetime deal is a way around that. You don't have to defend a monthly number if you're selling a lifetime subscription. You don't have to convince anyone the product will still be worth paying for in month six. You just have to get them excited once. It's the same instinct that makes founders

2:51launch with a free plan before they have a paid one. Same instinct that makes people charge $9 for something worth $49 or $99. It comes from a fear that no one actually wants to pay you, that you haven't built something that people want. So you just lower the bar until you can't fail. And you will get validation, just not the kind that you probably want or need. Someone paying $299 once tells you very little about whether they'd pay you $49 a month for the next few years. And there's a hidden cost that nobody mentions. This is the part that shows up, I don't know, 18 months later. So you took a one-time

3:24payment, but you did not take a one-time obligation, right? Those customers still need you to host the app, they need you to support it, they need uptime, they are going to file support tickets, they're going to email you with feature requests, they're going to expect ongoing development. The cost is permanent, and it grows over time, while the revenue from those users is usually fixed at zero once you stop selling lifetime deals. This isn't even really SaaS, right? I define SaaS as subscription software, where software provides most of the value. So, if it's

3:55not a subscription, it's just software. Just one-time sale software, which is something we did. We did that back in the day. I had those in the the late 2000s. And the moment subscriptions became a viable business model, I went all in on it because one-time sales are not great. So, over time, as you do these lifetime deals, your support load climbs with every new customer, but your revenue doesn't move, right? That's the opposite of how this is supposed to work cuz SaaS compounds over time. And this locks you in. You can't take the cash, get bored, and shut the thing down in 3 months. I mean, that's ethically you're

4:27stealing from people. You can do that, but people paid you for lifetime access. And you're going to torch your own reputation, and you're screwing people, basically. Because what does lifetime mean? Does that mean 3 months, 3 years, 30 years? It's a big obligation to sign up for. And I see some people using lifetime deals as a way to try to

4:45validate an idea whether it's worth it. And if they only sell a few thousand dollars' worth, they're just going to shut the product down. That feels wrong to me. Like, that makes the internet a worse place. Cuz here's the part that surprises people. A monthly subscription is actually more kind to your customers if you disappear. If you shut down a subscription product, the worst thing your customer is is out a month of payment, and they have to migrate. They cancel, they move on. But if you shut down a lifetime deal product and someone paid you $300 in January for it, and they get 6 months of use out of it, you

5:13kind of screwed them. Which brings me back to Davis. He and his co-founder launched a $299 lifetime deal for Uform to get their foot in the door cuz there are so many form builders out there. And they made $30,000 in a few months from this lifetime deal. And this did two things for them. The first is it got them a foothold against other much larger or better-funded competitors. And two, it validated that people wanted to pay for what they were building. So, did their lifetime deal work? Well, for them it did. But I want to be careful about reading into what actually worked because it wasn't just

5:49that they ran a lifetime deal. That's not why it worked. Let's look at what Davis had before he ran it cuz you're going to need to ask yourself the same question if you want to do a lifetime deal. Davis had an existing audience on X that he's spent years building. He had an email list from his previous product, 1 Up. Well, it's the current product other product that they own. He had a track record, which means when he said buy this thing that doesn't fully exist yet, people believed him. He had almost infinite runway from 1 Up, which is a profitable business that he and his

6:17co-founder own. So, he wanted the cash, but he didn't need it. And Uform already has a free plan, which is one thing a lot of people miss. If you already support free users, lifetime users cost you basically nothing extra or very little extra. He wasn't adding a new class of customers he'd never planned to carry. So, here's the cautionary part of the tail and the reason I still believe that most folks should not do lifetime deals. A bunch of founders watched the launch of Uform. They copied exactly and pretty much all of them are gone. If the lifetime deal were the thing that worked, the copycats would have worked,

6:52too, but they didn't cuz the deal was never the engine that made this work. It was the audience and the trust that were the engine. The lifetime deal was just how Davis converted what he'd already built into cash. You can't copy the tactic and skip the 5 years or 10 years that Davis and his co-founder had invested into building 1 Up, building their audience, and all the other things that went into making their lifetime deal actually work. Before I get to the rare conditions where this can work, if you're an early-stage founder, you should check out my new book, Idea to Traction. This book covers the part that

7:25nobody talks about, going from a blank page to your first paying customers. I'll show you how to figure out if your idea is any good before you waste months building it, how to have the customer conversations that actually tell you something, and how to launch even if you don't have an audience yet. You might think of it as the prequel to to SaaS Playbook. It starts at zero and it takes you all the way to product market fit or

7:44to knowing when it's time to walk away. You should join the wait list at ideatractionbook.com to get notified when it launches and you're going to get access to a live Q&A where I'm going to be answering all of your early stage questions. That's ideatractionbook.com. So, here are my rules of thumb for when lifetime deals might make sense. These are the minimum requirements that I would want in place before I would consider doing a lifetime deal. I think about lifetime deals the way I think about freemium, right? It's these minimum conditions but they're narrow and most founders assume that they're the exception when they're not. So, here's what I'd want to see before I'd

8:17tell you to go for it. First is a huge market. So, with lifetime deals you're always hunting for the next buyer because your existing customers will never pay you again. If your total addressable market is a few thousand companies, you're going to burn through it and you're done. You want built-in virality, some form of virality. Your lifetime users behave exactly like free users, so they need to earn their keep some other way. If every customer brings

8:37you more customers, that's real value. If they just consume support, it's a liability. The only other piece I'll say on this is I will make room for an AppSumo style exception, but only when there's a real benefit attached beyond the money. So, it's a real distribution push because AppSumo has what they have, a million people on their email list?

8:55Doing a deal with them might make sense. Or if there's a list of emails or customers you get to keep, uh, concentrated feedback from a few hundred users in a couple weeks, there can be other benefits. Ruben Gomez actually did this with SignWell. He did an AppSumo deal even though he didn't need to and he didn't need the cash up front. But he knew he was in a huge market, there was built-in virality, and he wanted a chunk of revenue up front but he wanted the learning. So, if the only thing that you're getting is a check and a support queue, I'm going to say it's usually not

9:22worth it. Someone asked me if I would do lifetime deals even with all this in place, like if if I met the criteria and I personally would not. I just think there's so much value in doing it the hard way, like the quote-unquote hard way, but it's the real way of getting real paying customers, building that MRR slowly over time, and maybe having a bit of delayed gratification is how I think about it. If I were to do it given who I am and my experience as an entrepreneur and the resources I have, that's the way I'd go about it. But if you're going to do it anyway, cuz some of you have

9:51already decided, you've already made up your mind to do it. If you're going to do it, do it with guardrails. So, if I were thinking about it, I'd run a monthly plan alongside the lifetime deal. Cuz you want to know whether anyone will pay you recurring. And if lifetime is the only option on the page and you're not also offering monthly or annual, you're not going to find out. I would think about pricing it at probably

10:102 years of the subscription price. That's This one's I'm still working out. I'm curious I'd be curious to see more data on these, to be honest. But if you were $40 a month, your lifetime price probably going to be between, you know, $500 and $1,000. Not going to be 99 or 199. People will tell you $99 converts better. Of course it does, but that's not the goal. It's not to be cheap. It's actually get a decent amount of revenue per customer. Next thing I do is I'd want to have an idea of how I'm going to get out of this before I launch. So, decide right now if you can what number

10:40kills the lifetime deal. For most products, I'd cut it somewhere between 5K and 10K of MRR. So, Davis hit 5K MRR and then stopped the lifetime deal. Probably want to write that number down or at least have it in your head before you do it. And the last thing is watch the addiction to the cash, cuz this is the one that gets people. A $12,000 weekend feels amazing, and grinding out another $400 in MRR feels like nothing, no progress. So, the next time things are slow, you're on another lifetime promo, and then another, and 2 years in you've got 1,000 customers who will never pay you again, and a business that

11:13is unsellable. The upfront cash can be like a drug, and you have to treat it that way. A lifetime deal is the extreme version of another move I see all the time. When the numbers aren't working, every instinct tells founders to lower their prices. That instinct is wrong. I'll walk you through why in this next video. If you found this video helpful, please give it a like and a subscribe. Thank you for watching. I'll see you next

11:34time.