The pricing model you choose for your software product shapes your business economics, customer relationships, and growth strategy. Subscriptions dominate SaaS, but one-time purchases are making a comeback.
How Each Model Works
Subscription (Recurring Revenue)
Customers pay monthly or annually for ongoing access. Examples: Slack ($8.75/user/month), Figma ($15/editor/month), Linear ($8/user/month).
Revenue is recognized monthly. Customers can cancel at any time (typically).
One-Time Purchase (Perpetual License)
Customers pay once for permanent access. Examples: Sketch ($120 one-time), Affinity Photo ($70 one-time), many indie Mac apps.
Revenue is recognized at purchase. Customer owns the software version they bought.
Revenue Comparison
Subscription Math
For a product at $20/month with 1,000 customers:
| Year | Monthly Revenue | Annual Revenue | Churn Impact (5%/month) |
|---|---|---|---|
| Year 1 | $20,000 | $240,000 | ~$130,000 actual |
| Year 2 | Growing (new customers) | Growing | Churn is offset by acquisition |
| Year 3+ | Compounding | Compounding | MRR grows if acquisition > churn |
One-Time Purchase Math
For a product at $200 one-time with 1,000 customers per year:
| Year | Revenue | Cumulative |
|---|---|---|
| Year 1 | $200,000 | $200,000 |
| Year 2 | $200,000 | $400,000 |
| Year 3 | $200,000 | $600,000 |
One-time revenue is predictable only if you maintain a consistent acquisition rate. There is no compounding.
Lifetime Value Comparison
| Metric | Subscription ($20/mo) | One-Time ($200) |
|---|---|---|
| LTV (24-month avg retention) | $480 | $200 |
| LTV (36-month avg retention) | $720 | $200 |
| LTV with upselling | $600-1,000+ | $200-300 (upgrades) |
| Revenue predictability | High (MRR/ARR) | Low (per-sale basis) |
Subscriptions generate higher lifetime value if retention is decent.
Customer Perspective
Subscription Pros (for customers)
- Lower upfront cost
- Always get the latest version
- Can cancel if needs change
- Usually includes support
Subscription Cons (for customers)
- More expensive long-term
- Lose access if they stop paying
- "Subscription fatigue" is real
- Feels like renting, not owning
One-Time Pros (for customers)
- Pay once, own forever
- No recurring bills
- Sense of ownership
- Cheaper long-term
One-Time Cons (for customers)
- Higher upfront cost
- May not get future updates
- Support often time-limited
- Must pay again for major versions
Business Implications
| Factor | Subscription | One-Time |
|---|---|---|
| Investor attractiveness | Very high (MRR metrics) | Moderate |
| Cash flow predictability | High | Variable |
| Customer acquisition cost (CAC) recovery | Spread over months | Immediate |
| Motivation to improve product | High (must retain customers) | Lower (already paid) |
| Customer support cost | Ongoing (included in subscription) | Time-limited |
| Pricing experiments | Easy (adjust monthly pricing) | Hard (price anchored) |
| Market size | Larger (lower barrier to entry) | Smaller (higher commitment) |
The "Once" Movement
A growing number of developers and companies are pushing back against subscription fatigue:
- Buy once, own forever resonates with users tired of $10/month for every tool
- Indie developers differentiate from VC-backed competitors by offering perpetual licenses
- Lifetime deals (one-time payment for permanent access) are popular on platforms like AppSumo
This works best for:
- Tools with a clear, bounded scope
- Products that do not require ongoing server costs
- Indie and bootstrapped companies
- Markets where subscription fatigue is high
Hybrid Models
Freemium + Subscription
Free tier for basic use, subscription for premium features. (Notion, Slack, Linear)
One-Time + Subscription Updates
Buy the software once. Pay annually (optional) for updates and new features. (JetBrains, Sketch)
Usage-Based + Subscription
Base subscription plus usage-based charges. (AWS, Vercel, Stripe)
Tiered One-Time
Different price points for different feature sets. One-time purchase with paid major version upgrades every 1-2 years.
Decision Framework
Choose subscription when:
- Your product requires ongoing server infrastructure
- Data and collaboration are core features
- You are venture-funded and need MRR/ARR metrics
- The product evolves rapidly with frequent updates
- You want predictable, compounding revenue
- Your market expects subscription pricing
Choose one-time when:
- The product runs locally (desktop/mobile app)
- No ongoing server costs per user
- You are bootstrapped and want immediate revenue
- Your market resists subscriptions
- The product's core value does not change frequently
- You want a competitive differentiator against subscription competitors
Our Perspective
Most software products we build for clients use subscription pricing. The economics favor it for products with ongoing development, server costs, and customer support. We implement Stripe-based billing with subscription management that supports free trials, annual discounts, usage-based pricing, and plan upgrades.
For clients building local-first or developer tools, we evaluate one-time pricing as a competitive strategy.
Contact us to discuss building your software product.