When per-seat pricing costs more than software you own

Per-seat pricing is designed to look small on the first invoice. A price per user per month seems like nothing next to the cost of building software of your own, and for a while it may well be. The number that matters is what it'll cost in three years, with the team you're planning to have.

You can work that out on one sheet of paper. Most businesses don't, until a renewal quote makes them.

How a per-seat bill grows

A per-seat bill depends mostly on one thing, and for a healthy business that thing only goes up: the number of people. Every hire adds a line. That's fine if each person gets real value from the product, and it suits the vendor very well, because your growth becomes their growth without anyone renegotiating anything.

Headcount is rarely the only thing pushing the number up, though. When you go through your own invoices, look for a few others.

The feature you need next often sits one tier up, and the higher tier price applies to every seat, not just the people who use that feature. Add-ons such as reporting, connections to your other systems, extra storage or a mobile module are often priced per seat as well, so each one gets multiplied by your headcount again. Occasional users cost the same as everyone else: the field crew who log in twice a week, the seasonal staff, the manager who only signs off on things. A seat is a seat, however little it's used.

Annual contracts usually renew at a higher rate, and those increases stack on top of each other year after year. And if customers, subcontractors or partners need a login, your seat count can grow well past the number of people on your payroll.

Working it out on your own numbers

You need four figures, and they're all on your invoices or in your hiring plan: what you pay per seat today, any add-ons that are also priced per seat, how many people will need access in each of the next three years, and the increase your contract allows at renewal.

Multiply it out year by year and add the three years together. Here's an illustration, using round numbers that don't belong to any particular vendor. Say a product costs $75 per seat per month, your team grows from 20 to 35 people over three years, and the price goes up 7% at each annual renewal. That comes to roughly $18,000 in the first year and about $36,000 in the third. Add one module at $25 per seat and every one of those figures goes up by a third.

Then do the same exercise for whatever you're comparing it against, over the same three years. Our ROI calculator helps with that side of it, setting what the manual work costs you today against a flat monthly fee.

When per-seat pricing makes sense

A lot of the time, it does. If your team is small and stable, everyone uses the product every day, and the way you work matches the way the product expects you to work, a per-seat subscription is good value and you should keep it. Our comparison pages start with exactly those reasons for every product we get compared against, because they're real reasons.

It starts working against you when those extra costs take over. Maybe most of the people you're adding only log in now and then. Maybe the features you need sit in a tier priced for companies ten times your size. Or maybe you're paying for a huge product and using a small corner of it.

How we charge instead

We don't charge by the seat. Our plans are a flat monthly fee based on what the software has to do, and adding the next ten people to your team doesn't change it. We chose that on purpose. A fee that rises with your headcount penalizes the very growth the software is supposed to help with.

In exchange, our plans are a 12-month partnership rather than a month-to-month subscription. The custom code we write for you is yours from day one, so you aren't trading one kind of lock-in for another.

Before your next renewal

Before you sign, write down the three-year number rather than the monthly one, and ask the vendor three things. What would the next tier up cost for our whole team? How much will the price go up at renewal? What do occasional users pay?

If the answers are fine, renew and don't give it another thought. If they aren't, bring the quote to a call. We'll tell you honestly whether building makes more sense or whether you're better off staying where you are.