Annual vs monthly SaaS pricing: discount and cash flow

You

Why offer a yearly plan before the product even exists? Wouldn't monthly be simpler?

Alex Tutor

Monthly stays the default. The yearly option earns its place three ways: cash now, a stronger signal, and fewer moments to leave.

Nina

Cash now, I understand. Why a stronger signal?

Alex Tutor

A shop that pays a year ahead is betting you'll still be around and useful in twelve months. That's a louder yes than one month.

Oscar

And fewer moments to leave: a monthly shop decides twelve times a year whether to stay. A yearly one decides once.

Alex Tutor

Question 1

Which are real reasons to offer GarageDesk’s yearly plan from day one? Select all that apply.

Choose all that applyCash arrives up front and extends the runwayA shop paying a year ahead gives a stronger signal than one monthA yearly shop decides whether to stay once a year, not twelve timesA yearly payment makes the month it arrives look like a record monthYearly shops don’t need the product to work

Alex Tutor

Twelve months at 600 is 7,200 UAH. The annual plan costs 6,000: that's 1,200 less.

Nina

1,200 / 7,200 = 16.7% off. Or two months free: 6,000 is ten months at 600.

Alex Tutor

“Two months free” is much easier to say at a counter than “16.7%”.

You

Why not a bigger discount, to get more yearly shops?

Alex Tutor

Every hryvnia of discount is revenue you never see. Too small, and nobody bothers; too big, and you've cut your price for a whole year. Two months free is a common middle.

Alex Tutor

Question 2

Suppose GarageDesk priced the year at 6,600 UAH instead of 6,000, with the monthly price still 600 UAH. What discount would the yearly plan give, in percent? Round to one decimal place.

Your answer

Units: % (e.g. 12.5)

Oscar

If two shops pay for a year, that's 12,000 in the bank on day one.

Alex Tutor

Enough for six months of tools at 2,000. But it isn't a 12,000 month: you owe those shops a year of service.

In the monthly numbers, a yearly shop counts as 6,000 / 12 = 500 UAH a month. That's how it will show up in MRR, your monthly recurring revenue, later in the course.

Nina

So the bank says 12,000, and the monthly numbers say 1,000.

Alex Tutor

Both are true. Spend by the monthly number and keep the rest as a cushion. That cushion is extra runway.

Alex Tutor

Question 3

Three shops pay 6,000 UAH each for a year. GarageDesk’s hosting and tools cost 2,000 UAH a month. How many months of tools does that cash cover?

Your answer

Units: months

You

What if most shops pay monthly and only a couple pay yearly?

Alex Tutor

Then add them up the same way: each monthly shop is 600, each yearly shop is 500.

Oscar

The yearly shops look smaller in that sum.

Alex Tutor

They are, a little: that's the discount. You trade 100 a month for a year of certainty and the cash up front.

Alex Tutor

Question 4

After launch, 6 shops pay 600 UAH a month and 2 shops are on the 6,000 UAH yearly plan. What is GarageDesk’s monthly recurring revenue (MRR)?

Your answer

Units: UAH a month

You

On the pre-sale page it's three months for 1,800 or a year for 6,000. Why three months, not one?

Alex Tutor

One month at 600 is too small to be a real test, and there's barely time to see a car come back. Three months is a real commitment but a small one for a shop that isn't sure.

Oscar

And some owners hate paying a year for anything.

Alex Tutor

Then three months is their way in. Don't push the year; just make it visible.

Nina

Should the three months get a discount too, like the year?

Alex Tutor

No: 1,800 is exactly 3 × 600. The discount belongs only to the longer commitment; otherwise the year stops being special.

Alex Tutor

Question 5

Why does the pre-sale page offer three months for 1,800 UAH next to the year, instead of one month for 600?

Choose one answerThree months brings in more cash than a yearOne month is too short to see a car come back and too weak a commitment; three months is a real but small step for an unsure shopMonthly payments are forbidden before launchTo push every shop toward the yearly plan

Oscar

Greg asked me: “Why would I pay a year up front for something that doesn't exist yet?”

Alex Tutor

A fair question. Answer it honestly, and don't forget he can say no to the year and still say yes to three months.

You

Can I write Oscar's answer?

Alex Tutor

Please. Numbers, the refund date, and no pressure.

Alex Tutor

Question 6Short answer · AI-checked task

Greg asks: “Why would I pay a year up front for something that doesn’t exist yet?” Write Oscar’s honest answer in 3–4 sentences, with numbers.

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Alex Tutor

Next: Oscar takes the page to twelve shops. The module case is what happens next.

Alex Tutor

That’s the lesson. You answered every task — nicely done.

Next lesson: The first five prepayments