Outseta's Approach To Pricing

The creator economy, payment processing fees, and what Outseta's customers can expect with regards to pricing changes

By
Geoff Roberts
·
10 min read

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Earlier this week a pricing change from Gumroad rocked the creator economy, leaving a lot of people upset. As a founder operating in the creator space—as well as being a Gumroad customer myself—my initial reaction was to opine in some way, sharing the pros and cons of the move from my perspective.

But I figured it was much more important to share our own approach to pricing—and to reassure our customers so they know what to expect from us in terms of pricing changes going forward. This post will:

  • Walk you through our existing pricing strategy, making it abundantly clear what aspects benefit our customers and what benefits us
  • Discuss how we handle pricing changes, so you'll never be surprised
  • Share some of business decisions that we've made that enable us to deliver really founder friendly pricing

At the end of the day our pricing strategy has always been to deliver what founders and creators need most—predictable, low overhead.

A brief history of Outseta's pricing changes

In the six years that Outseta has been in business, we've made two pricing changes—and overall our pricing has gone down.

When we first launched Outseta, we charged a flat fee of $99/mo and all-in 2.9% payment processing fees. Our initial thought process was that the $99/mo price tag was warranted given the breadth of tools that we offer. And when we launched we processed payments via a different payment gateway (not Stripe) where we were able to make roughly .5% in profit by charging the 2.9% payment processing fee—so that delivered some payment processing revenue despite being the same price as Stripe's transaction fees.

This plan didn't last long. We heard the same message over and over again from customers:

"We're bootstrapped start-ups—we need to keep overhead as low as possible out of the gate, but we have no problem paying you more as we earn more."

Our first pricing change was a reaction to this feedback. We changed our lowest paid plan to $29/mo and also moved to using Stripe as our payment gateway, taking a 1% fee on top of Stripe's fees. This delivered what was asked for—lower overhead, while we captured a bit more payment processing revenue as companies grew.

This was our pricing for almost four years, during which time our product matured dramatically. Our second pricing change then came in April 2022, when we bumped our entry level pricing from $29/mo to $39/mo. We've also experimented with freemium, free trials, and only offering paid subscriptions—some of that experimentation is documented here.

But in a nutshell, that's how our pricing has evolved to date.

Outseta's pricing strategy today

Today Outseta's pricing starts at $39/mo after a 7-day free trial and we charge a 1% payment processing fee on top of Stripe fees. The all-in fees for payment processing with Outseta are 3.9% for customers in the US. In the video below, I talk you through our pricing model and strategy—the key points are also summarized below.

  • Our overarching objective is to provide founders with predictable, low overhead while delivering a ton of value.
  • We keep our subscription fees as low as possible.
  • Our subscription fees are tiered based on the number of contacts in your Outseta account. More than anything this is a protective measure against email abuse—we can't charge a flat rate, because that opens us up to users to who send massive volumes of email (for which we incur costs).
  • Our subscription fees are very much in line with the cost of most email marketing platforms—but we also give you billing, authentication, CRM, help desk, and reporting tools. We think we deliver a ton of value for our fees.
  • The upside in our business comes from the 1% payment processing fee. This aligns our interests with our customers.
  • We don't use "Stripe Billing" under the hood, which the vast majority of our competitors do—this allows us to pass off an additional .5% to .8% in savings to our customers when it comes to payment processing fees. Even if you just use Stripe Billing, your payment processing fees will be 3.4% to 3.7% at the very minimum compared to Outseta's 3.9% all-in fees.
  • Finally, we directly invoice you each month showing you both your subscription fee and total payment processing fees directly on the invoice. This absolutely hurts us as a business—but we think it's transparent and the right thing to do. These fees can look like a big number, but they are almost always dramatically less than what you'd pay most competitors who never put the total fees directly in front of you. They're most often taken out at the point of the transaction and are shown as "application fees" in Stripe, so you're never confronted with the total.

I think it's important to specifically call out how this model benefits you, as well as Outseta as a company.

How this benefits you

  • You get a tightly integrated tech stack at an artificially low price. If you compare the price of Outseta to buying comparable billing, authentication, email, help desk, reporting tools our subscription fees are significantly lower.
  • We save founders hundreds of hours that are typically spent integrating tools and writing custom code on top of Stripe. If you quantify the cost of your time very conservatively, this represents tens of thousands of dollars over time.
  • We don't charge any per user fees. This gives you more predictable overhead as you grow your team. You can invite everyone to Outseta without getting charged for extra seats in your CRM or help desk—and you don't need any password sharing nonsense to keep costs low.
  • The 1% fee that we charge is a constant.
  • Because we built all of our own subscription management and invoicing, you don't need to pay for Stripe Billing.

How this benefits us

  • By charging subscription fees, we are able to grow a recurring revenue revenue stream to fund our business. While I would love to offer Outseta for free, that's not viable for us because we offer tools like email that incur ongoing costs aside from just development.
  • We have pricing that grows on two dimensions—as the number of people in your CRM grows, you'll move through Outseta's subscription tiers. And as our customers charge more, we earn more via our 1% payment processing fee. Pricing that grows on multiple dimensions is generally a very good practice for most SaaS companies.

How we handle pricing changes

This post more than anything is meant to be reassuring—we never want to abruptly hit you with a pricing change. To that end, there are some fundamental ideas that I want to share in terms of how we think about pricing changes at Outseta.

First, I expect that we will change our subscription fees as some point in the future. Specifically, we'd like to move our entry level price point to $49/mo—we think that's very fair given what we deliver. But we also think our entry level price point needs to continue to be very modest given the audience we sell to (mostly bootstrapped founders).

Second, we'll always look to honor your existing pricing and only raise rates for new customers. We've done this every time we've changed prices to date—it's our way acknowledging those who took a chance on us early on for their support.

Third, if we do ever decide that we need to change our prices for our entire customer base we'll provide at least 6 months of notice. We want to give you as much time as possible to make alternative plans should you feel that you need to.

Finally, we do embrace pricing experimentation—it's something our product is designed to facilitate and something that been critical to our own success to date. That said, pricing experiments will honor the other points I've made here and only affect new customers.

The benefits of focusing on building a sustainable business from day one

As we head into an economic downturn you will likely continue to see many software companies increase their pricing, with sustainability as the primary reason given. In most cases this is likely true, likely warranted, and I'm the first to applaud any CEO for taking the actions needed for their business to survive.

That being said, as a customer you can learn a lot about a company and how you'll be treated in the future by taking a closer at the decisions they've made in the past and also by what exactly they mean by "sustainability."

In short, sustainability can mean "I need to make this move for my business to survive" or "I need to make this move to sustain my growth rate and valuation"—and these are very different circumstances. If a change needs to be made in order for a company to financially survive, the CEO would be crazy not to make it. But if the change is really motivated by sustaining a growth rate or valuation, it's a deliberate choice and customers are footing the bill.

This cycle of building your business in unsustainable ways during the good times, then needing to take drastic measures to refocus on sustainability during down times is exhausting. I don't think it's good for companies, customers, or innovation at large.

Many CEOs who have raised funding are under immense pressure to continue growing their company as a specific rate in order to keep their investors happy, their valuation high, and a potential exit lucrative as possible. Watching their valuation soar through the good times was intoxicating, and many will be motivated to make sure that doesn't slip away. Importantly, it's any CEO's prerogative to make that call—but as you assess why a change was made, it's certainly something worth considering that's very much indicative of how you'll be treated as a customer.

Looking at a company's past decisions is also incredibly telling. If a company borrowed money to build their product, or to build their team, they're going to need to borrow money from their customers when that well dries up. And this is why you'll generally be in better hands with businesses that were built with sustainability in mind from the get-go.

For example, we didn't fund building our product by taking on debt, or raising from investors, or crowdfunding. We worked on Outseta part-time, consulted to pay our bills, and distributed equity as compensation incredibly generously—no one at Outseta owns less than 3% of the company today. Rather than propping our business up with funding, our team delayed gratification for years so we could remain independent, sustainable, and pass savings along to our customers. This wasn't done solely out of good will—this was also done specifically because it fit with the needs of our target market.

This is just a fundamentally different approach to company building, but it's worth note that the primary benefactors are our customers. Building Outseta this way means that the potential upside for me, for my co-founders, and for our team is generally less lucrative than the more typical scenario where a single founder owns the lion's share of the equity in a business, aside from investors.

We only answer to ourselves and have no obligations to chase valuations or specific growth rates. And I think it's pretty cool for our customers to know that when Outseta has financial success, it's the whole team that reaps the rewards in a significant way and not just one person who becomes ungodly rich. Stayed tuned—we'll be sharing our end of year equity allocation update publicly on January 10th.

I'm happy to see that sustainability is having its day in the sun—and I would encourage you to support more businesses where this approach is built into the very fabric and DNA of the company, rather than being an approach that's only used only as a corrective measure.

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