Software Growth

LTD (Lifetime deal)

A lifetime deal sells permanent access to a SaaS product for one payment, often via AppSumo, trading future recurring revenue for cash now.

A lifetime deal (LTD) sells access to your software for as long as the product exists, for one up-front price instead of a subscription. AppSumo is the best-known marketplace for them. For a founder with no audience and no cash, a launch there can look like a shortcut. It is a loan against your future, repaid in support tickets and server bills.

Why founders do it

  • Cash now, often thousands or tens of thousands of dollars in a few weeks.
  • A burst of users, feedback and reviews for a new product.
  • Early users who, according to Indie Hackers discussions, tend to be engaged because they paid up front.

What it costs

An LTD gives up the thing a SaaS business is built on: recurring revenue. The buyer pays once while you keep serving them. Compare the one-time price to your cost to serve.

Say you sell lifetime access for $99, the marketplace keeps 30% (an assumed split, since terms vary) so you receive $69, and each active user costs you $3 a month in hosting and support. After 23 months you are losing money on that customer, and they have no reason to leave. If the same user would have paid $15 a month, you gave up $180 a year, every year.

The Indie Hackers thread on AppSumo deals lists the usual drawbacks: products being discontinued after purchase, branding limits, and the loss of recurring income (source). Buyers also tend to expect updates and support for life, which is the hard promise to keep.

Rob Walling's view

Rob Walling is bearish on LTDs for SaaS. In episode 845 of Startups for the Rest of Us he describes them as working like freemium: you get cash up front but limited recurring revenue, and a subscription is the healthier model. He says they can work when you already have an audience, runway and built-in virality, as in the Youform example, and that many copycats that tried the same thing have shut down (source).

If you do it anyway

  • Cap the number of deals. A small, fixed number limits your liability.
  • Choose features with low marginal cost. Avoid LTDs on anything with per-use costs such as AI calls, email sending or storage, unless usage is capped.
  • Define "lifetime" in writing, such as the lifetime of the product, and what is excluded (new tiers, add-ons, usage over a cap).
  • Keep LTD buyers on a single limited plan. Do not let it become your top tier.
  • Keep the regular subscription visible. Someone on an LTD can still buy an upgrade, and the deal may convince the audience that your product is cheap.
  • Do not count the cash as revenue you can plan on. It is a one-time event, and it hides weak retention if you mix it into your MRR charts.

Better first moves for a bootstrapper

A founding-member discount, an annual prepay offer, or a time-limited trial gets you early cash and feedback without a permanent liability. Jason Cohen describes annual prepayment as a way to fund acquisition from customers' own cash (source).

Sources

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