I don’t subscribe to the “everything muse be free” meme that basically ignores the intrinsic value a product or service gives you. If a product or service provides me with a real value then I am happy to pay for it – either through purchase/subscription or from being monetized via ads/usage data etc.
But I’m surprised at just how expensive some of the darlings of the Web2.0 SaaS era work out to be when used at scale.
Like a crack dealer, giving you the first hit free, most of them offer a “free” plan that is clearly designed to be severely limited the moment things begin to work out for you and your business takes off. There’s nothing new with this way of doing business, but have you seen just how much your hits costs once you get addicted?
Two examples that are particularly of mind are Freshbooks and Harvest. Both are great products; built by great people I have had the honor of meeting over the years.
Time tracking service Harvest starts out at $12/month ($144/year) for a single user but at Swordfish Corp there are now three of us, requiring the 5 user plan @ $40/month ($480/year). Not much change short of $500 seems pretty expensive for a year of time tracking.
Invoicing service Freshbooks has a free and slightly limited option for individuals but a company of three would need to use the 3-staff plan @ $39/month ($468/year) but I notice that once we take on a fourth person we would need to skip to the 10-staff plan @ a jaw-dropping $89/month ($1068/year).
When researching these plans, I’m also considering what my future business needs are. With services like these, I want to pick providers who can scale with me as my business (hopefully) grows.
I should point out that one way of getting around this is to share accounts, but for time tracking this doesn’t work and for invoicing, everyone at Swordfish does their own invoicing on their client accounts.
Now, I’m not against paying for these kinds of services in general. Between myself (personally) and Swordfish, I have paid subscriptions to NolaPro (Hosted accounts package), Shoeboxed (receipt and business card data entry) and Flickr.
And I’m not saying that it’s not worth $480 a year to the company for good time tracking. I’m just saying I’m not sure a service like Harvest is offering me $480 of value a year over and above using a simple Google Spreadsheet created in 20 minutes, for free, and shared within the company.
I’m a fan of the Freemium model, but if it’s going to work the numbers can’t exponentially increase as your usage increases – it’s not fair (a form of bait-&-switch from the free accounts) and it’s also not reflective of the true cost of SasS where the cost should exponentially flatten out at scale.
In all honesty, if you are complaining about $1000/annually for a hosted application which will likely pay for itself if you can just find one extra billable hour per user, then I think you do not understand value very well.
I mean sheesh, Freshbooks (and I’m sure Harvest) make you look so damn professional that I’d be surprised if they don’t help you make MORE money.
Hey John,
I don’t doubt that Freshbooks make you look professional in terms of the way you invoice clients – v important.
But that doesn’t mean other mechanisms don’t either… I’ve been using a combination of Google Spreadsheet (time tracking) and Microsoft Excel for invoices and it all looks pretty professional in terms of what clients receive (a PDF of an invoice generated in Excel, and/or a copy in the mail if requested).
I also don’t necessarily buy into the suggestion that these particular hosted apps save me much time on an on-going basis – it’s not that time consuming to clone my invoice template, fill it in and then add the details to the invoice register in my Excel file. Sure I had to set this up first time, but after that I think the execution of hosted vs Google + Excel is prob about the same.
Like I said, I’m not debating the value per se, I’m debating whether the price of the hosted model is worth $1000 more than doing it yourself per year.
You are better than me. I just escaped the hell of spreadsheets and PDFs. I guess it works more for certain people but I realized the less time I spend on invoicing, etc, the more time I have to think about the business.
Hey Sunir from FreshBooks here,
One thing we are working on is cleaning up how we communicate our pricing. I think it’s confusing, and I work here!
Every account comes with one administrator plus the staff, so for a 3 person company you really only need the 2 person staff account ($29/mo.). If you add a 4th staff member, it’s $39/mo.
Admittedly not obvious to anyone, if you add a 5th staff member, it’s still only $49/mo. You can add staff members individually.
The $89/mo. package is more of a discount for larger firms.
So, the clear lesson folks: communicate your pricing sensibly!
— Sunir, Chief Handshaker, FreshBooks
Thanks for writing such an interesting article, Ben! I think the pricing for Harvest’s plan may also be a bit unclear, we apologize, and we will look to make it more clear on our pricing page.
For Solo plans, extra users are $10/month. So 3 users total on a Solo plan is $32/month ($12 + $10 + $10), not $40/month. That works out to be $384/year, which is a bit more of a value than $480/year.
These prices per employee come out to less than $11/month per employee, which we believe delivers great value to a growing organization like Swordfish Corp.
Hope this is helpful, and thanks for instigating such lively discussion!
Best Wishes,
Karen
—
Blog: http://www.getharvest.com/blog
Twitter: http://twitter.com/harvest
Fun: http://www.worldclockproject.org/
[…] then you get the same problem only brought into sharper and more immediate relief. Last weekend, Ben Metcalfe wrote that: I’m surprised at just how expensive some of the darlings of the Web2.0 SaaS era work out to be […]
Thanks for writing this Ben.
Don’t forget 37 Signals apps. They also seem to be inching up in terms of cost but it seems that these companies will charge what the market will bare.
That said I generally disagree with most of the pricing models for these apps. I think anything over 3 options for pricing is deliberately meant to confuse a prospect. I also don’t get why everyone is so in love with the monthly bill… Just one more thing to worry about..
It’s too bad mobileme released with so many bugs.. I really think Apple is god when it comes to pricing. $99/year for their standard mobileme service seems just right and the other guys should take notice.
For billing I use HostBill, hostbillapp.com they are free for few accounts just you need install it.
HourDoc is tool for Time Tracking. http://www.HourDoc.com is right treatment for time and labor management processes has to be an easy-to-administer and affordable solution for Freelancers, supervisors, employees and HR and payroll managers. They offer free application to companies less than 50 employees.
Hey Ben,
Great article, I am in the same position with my company, I need to automate my billing department (me) and allow my team access to account information.
I found a wonderful app called [invoicemachine] that included both an impressive UI and affordable packages, only problem … they haven’t updated their twitter or blog in over a year…
[getballpark] is another contender to possibly a overpriced service!
So what happens if my 50 invoices are only a few hundred dollars … is it justifiable?
I have been used Zoho invoice in the past, but then switched to Freshbooks and have been using it since then. Honestly was not very impressed or satisfied with its service. I have signed-up for a free Invoicera account and have been blown away with its service. Soon would be purchasing it for my small accounting firm.
$20/month for a 25 client invoicing software. This is the base price for Freshbooks.
That is $240 a year to send a total of 25 clients (a very small business) unlimited invoices and time track unlimited number of contractors.
I think it is extremely expensive.
Software – yes remember SOFTWARE?? That stuff that costs $59.99 (example: Quickbooks Lite)
And you can use it for more than a month, with as many clients as you can put into it.
The only thing those crazy old SOFTWARE’s didn’t do was print your invoice as a PDF (takes about 5 seconds to do, and even less time to find a free app to make your PDF for you)..
Oh and of course, take payments via a Payment Gateway…
Unfortunately I know how much payment gateways cost/month. you can almost buy your OWN exclusive payment gateway for $20/month.. one you and thousands of your friends could use.
Again. I shouldn’t be upset about Freshbooks charging whatever they can get.
If people are willing to pay huge monthly service fees because they are lazy or technically challenged then that is not my problem.
I think i’m upset that I would like to use the service because it is very tidy, elegant and well done.
But I just can’t justify paying what amounts to 10 times the amount for similar software (on CDR) type solution, over the year.. And then being limited on top of it to the number of clients you can have and to how many people can enter information / log into the account to add information.
It doesn’t cost more to allow 5 people access to your data.
It doesn’t cost more to allow 100 clients instead of 25.
Honestly I think what upsets me is that it makes no sense and it’s greedy and I find no logic in the price breaks/upgrades.
I would love to use it, at $5/month.. maybe $10.
How about this..
To put it in perspective.
If they had made an IPHONE application.
It would have been sold for $19.99 a one time application purchase price.
With $2.99 a month for the ‘services’ they provide now.. topping out at maybe $4.99/month.
I think they have made a giant mistake and lost a huge opportunity.
Would you rather have 50 people willing to pay $29.99
or 500 willing to pay $9.99/month.
A lost customer rarely comes back again. A lost customer is for good these days.
They made arbitrary pricing that I personally can’t justify…
So they lost me as a customer/ potential customer.. and the 100 or so people I would have turned on to their product..
What really is the cost of being greedy?
I guess you must try Replicon time tracking software then.
Wholeheartedly agree with the comments above, I used Freshbooksfreshbooks free account to get started and think the service is great. But it is not worth 30 used per month when their are similar services available at 5 used. Currently planning to switch to curdbee.com who have a very attractive free plan and a feature rich pro plan for 5 used per month.