Stop Charging Your SaaS Users Like This
I recently experienced a huge drop in Monthly Recurring Revenue (MRR), and it hit me like a ton of bricks—I had been charging my users wrong this entire time! 🤦♂️ Let me take you through the details of what happened, how it impacted my business, and how you can avoid the same pitfalls.
The Unexpected Revenue Drop
On July 13th, a seemingly random event somewhere in the world caused my business to suffer a significant revenue hit. I promise to keep this short and to the point, so let’s dive right into it!
- Big Problem: I woke up and checked my Stripe dashboard only to find that my MRR had taken a massive dip.
- Initial Thoughts: I assumed that a bunch of users must have left the platform. So, I started investigating.
- Outcome of Investigation: I couldn't find any substantial decrease in our user base, which left me puzzled.
Connecting the Dots
Things got interesting when I realized that my other SaaS products, each with their own Stripe accounts, showed the same pattern. After a quick Google search, I noticed that the value of the S&P 500 was following a similar trend. The news confirmed that something significant had happened in the USA, which caused the entire stock market to take a hit.
This realization hit me: the US Stock Market and my MRR were correlated, and one had directly impacted the other.
Understanding the Currency Issues
Here’s where things got complicated:
Action | Details |
---|---|
Stripe Account Setup | I needed to link a bank account to receive payouts. I set my currency to Swiss Francs (CHF) but incorrectly charged my users in US Dollars (USD). |
Exchange Confusion | When charging in USD but making payouts in CHF, every transaction required currency exchange. This meant that as the USD value fluctuated, my revenue was adversely affected. |
Fixing the Problem
So, how do we fix it? It's straightforward!
- For Businesses in the US: If you operate in the US and charge in USD, you don't have a problem!
- For European Businesses: Charge in Euros instead of USD. Don't fall into the trap of thinking that USD is the default currency for SaaS.
- For Others Like Myself: If you’re based in Switzerland, consider charging in either USD or Euros.
Here’s what we did:
- We implemented geolocation detection on our website to show prices in Euros for European users and USD for everyone else.
- We created two price configurations in Stripe for every product: one in USD and one in Euros, ensuring users were charged according to their location.
Summary Checklist
To sum up, here’s a useful checklist:
- Create two prices for each product in Stripe: one for USD and one for Euros.
- If offering both monthly and yearly pricing, ensure separate prices exist for each currency.
- Use geolocation to detect user location and display the correct pricing page.
- When users upgrade, instruct Stripe to use the appropriate price based on the user's location.
Bonus Insight: The Psychology of Pricing
Here's the exciting part! Initially, I planned to translate the prices neatly from USD to Euros, resulting in €26.5 for our $29 plan. However, I chose to charge a clean €29 instead, despite it being slightly higher than the conversion. Surprisingly, this had zero impact on conversion rates!
Why? Well, €29 doesn't feel as daunting as $32 to users. It's all about the psychology of numbers! In the end, our revenue benefited from this adjustment—what a win!
Final Thoughts
Handling payments for your products can sometimes be a real headache. I learned this the hard way! I hope you found value in these insights.
If you enjoyed this content, please leave a like, and I’ll see you soon! Take care!