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When you’re building a business, cash is king. Cash lets you do things like hiring and customer acquisition, and the more of it you’ve got at any given time, the faster (theoretically) you can grow. We recently tried something that got us an extra $14,000 in cash in seven days. Let’s take a look at how we did it.

So, what’s great about subscription businesses is the relative stability. You get a steady-ish stream of revenue that slowly increases over time and is much less susceptible to the whims of other business models that are based on one-off payments.

But what can be slightly frustrating is the “slowly” part. Many times, those customers will be paying you every single month for years, yet you have to patiently wait for that money to trickle in. Or do you?

What if you could get the benefits of a pile of cash and the stability of knowing your customer will be around for longer than a month? Well, my friend, you can, thanks to one thing: annual subscriptions. They’re the magical unicorn of the SaaS world.

There’s a catch, though. The way most companies approach annual plans is to just slap it on their pricing page and hope the customer picks it over the monthly option, maybe enticing them with a little discount.

That’s the passive way to make yourself feel good about “doing something” but I guarantee you’re leaving money on the table.

The annual upsell

Instead of thinking of your annual plan as just a different payment option, think of it as a feature to upsell. “Sell” is the operative part of that word. It requires a little bit of work, but if you do it right, it will pay off.

For nearly two years we’ve been prompting users, via email, to switch to annual a few months in to their subscription. Unfortunately the results were always a bit dismal, with the average conversion rate to annual being around 4.75%.

Here is the contents of that email…

On the surface that looks like it’d potentially work just fine. It highlights the benefits and makes it a quick, self-serve “click the link and be done!” switch. But it always felt a bit too salesy, so I decided to try something a bit more personal and informal.

How’d this puppy perform? The conversion rate on this email is 11%…a whopping 131% increase! It generated over $14,000 in revenue in the first seven days. That’s the stuff you write home about!

There are a number of things different about this email.

  • A 3-month discount, instead of 2
  • Manual process — No one-click, self-serve switch process
  • Personal — Doesn’t include automated “here’s how much you’d save” info
  • Urgency — “We’re testing this out and only offering it to a subset of customers” (which is true, we don’t offer this to lower paying plans)

The open rates were basically the same between the two emails, so subject line didn’t seem to matter. Ultimately, the combination of urgency, personal touch, and a bit larger discount pushed this one over the edge.

I do think the additional discount played a role in increased conversion, but from talking with other founders, most tests point to the size of the discount actually not being that big of a deal.

Future testing

The problem with this format is that it’s not really repeatable over the life of the customer. I suppose you could send it to them once a year, but then the “urgency” factor gets lost.

Testing out a series of these emails is certainly worth our time, as is testing out the size of the discount itself (number of months, percentage discounts, etc).

What are some things you’ve tried to increase annual subscriptions? Any formats you’ve found work really well?