New SaaS Business Model: Free vs. "Fremium" vs. Subscription Only

[mojorisin]

Hi All. I am investing into an app for financial management to solve my own problem. Shared with a few friends, who starting using it as a beta test for me.

Now that the model is working to my satisfaction, and my test groups, I'm a couple months away from a formal "launch" (still have a bit of refinement to do).

This is a financial tool SaaS business that is designed around a monthly subscription.

I'm investing ~$10K into the business with $500 monthly run costs (including developers). I do not need to recoup the investment anytime soon, nor need any immediate income from the business. This is a side hustle, with my dream to grow over time to replace my 9 to 5 income.

My objective is either 1) Flip the site for a profit 3 to 5 years down the road or 2) Run the site using the monthly subscriptions as income

So the question to you all is what type of user pricing model to use.

1. Free. I start with a fully free model, ideally ramp up subscribers quickly for 1 to 2 years. Then flip to a paid model down the road.
2. Freemium. Use the core tools for free (bronze) then offer premium services for a fee (gold)
3. Full Subscription Only. To use any of the tools you must be a monthly subscriber. Bronze is $15 monthly vs. Gold $30 monthly

I figure many of you have experience and words of wisdom. I'm sure there are details I'm not considering, so be nice my focus right now is on a quality product. Then launch, and iterate based on what the market is telling me.

Thanks.

 

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[MJ DeMarco]

I think it depends on the stickiness and usefulness of the app. If that is good, then I’m preferential to the FREEMIUM model.

 

[doster.zach]

I would just do FREEMIUM as well. Make it so that even the FREE version is valuable and then once users are acquired, it should be natural friction to keep them from leaving.

i.e. Google Drive giving free storage that once you hit the limit it's more painful to move everything than it is to pay an extra 5 bucks a month.

 

[AnasHarn]

Here is my point of view :
-Free model : +++ nb of users, --- revenues, the day you flip to a paying model, you may loose a lot of users, and maybe their trust
-Freemium : ++ number of users, + revenues, you may generate some revenues & the conversion will depend on you and your ability to provide good enough functionalities to justify their subscription
-Paid model : -- number of users, ++ revenues, you will have to be really good, well know to make people make upfront for your tool, however, the convinced ones will generate a stable revenue

 

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[mojorisin]

All, appreciate the insights. Yes, the app is "sticky".

Freemium also allows me to attempt to sell "add on" services to the non paying group.