Besides being a Co-Founder of The Agile League, Micah is also a Co-Founder of Obsidian Portal, a SaaS website. He’s got a fair amount of experience dealing with recurring billing, and here he talks about why Obsidian Portal has to change their subscription billing system (again).
Subscription processing on Obsidian Portal has a long and sordid history. For a quick summary, we started about 4 years back with a hand-rolled Amazon Flexible Payment System (FPS) set of cron jobs. From there we moved to Amazon SimplePay. When that got too annoying we moved to our current setup, Chargify backed by Authorize.net. I wrote about our reasonings for the move in another blog post, and I highly suggest reading it, as most of it still applies. Unfortunately, with yet another price increase, Chargify is just too expensive and we have to move again. To be clear, we’ve always been happy with the service, and we believe in paying for the right tool, but you can’t completely ignore price when choosing your service providers.
The Many Prices of Chargify
The easiest reason to see why we’re leaving is to simply compare these 3 images and the table below:
| 100 Customers |
500 C’s | 1000 C’s | 3000 C’s | |
|---|---|---|---|---|
| Original | $49 | $49 | $249 | $249 |
| Aug 2010 | $99 | $99 | $349 | $999 |
| June 2012 | $1291 | $129 | $4592 | $12993 |
How High Can They Go?
At all tiers the prices have climbed, and it’s an over 500% increase at the highest tier. Besides the concrete issue of climbing prices, it’s also just irritating to keep having the ground shifting under your feet. How can we price our products to our customers when we don’t know if our underlying costs are going to radically shift?
One Pie, Many Fingers
Plus, it’s important to realize: Chargify is only one of three providers with a finger in the pie. The above table is the cost of Chargify’s recurring billing SaaS platform. That platform sits on top of our payment gateway (Authorize.net) and our merchant account. I honestly have only a foggy idea of how much we pay on those due to the byzantine nature of how they’re billed: transaction fees + transaction %’s + monthly fees + card vault fees + authorization fees + capture fees + batch fees + a ton more fees. Our statement has a two-page list of the types of fees, with such helpful names as DOMACQ FGN STD and REGULATFMIDMT1. Ultimately, these numbers will be different for everyone, but in our case, we’re looking at roughly an extra $250/mo per 1000 customers. Not insignificant.
Cost per Customer
The easiest way (for me) to compare all the different services is on a cost-per-customer basis. To establish this basis, I’m going to use Obsidian Portal’s two most popular plans: $5/mo and $40/yr. Note: We consider our actual subscription data to be confidential business information, but these numbers are in the rough ballpark.
Assumptions
- Ignoring all flat fees (setup fees, $20/mo gateway fee, $20/mo CIM fee, $8/mo statement fee, etc.)
- $0.40/customer/mo for Chargify (roughly what we pay under the current pricing)
- $0.10/each for the Authorize.net transaction fee
- $0.25 + 2.5% transaction fee for the merchant account – Actual fees are incredibly variable and complicated.
| Chargify | $0.40 |
| Auth.net Gateway | $0.10 |
| Merchant Account | $0.375 |
| Total (monthly) | $0.875 |
| Total (yearly) | $10.50 |
| Chargify | $0.40 |
| Auth.net Gateway | $0.10 |
| Merchant Account | $1.25 |
| Total (monthly) | $1.75 |
| Total (yearly) | $6.151 |
Next Time: The Alternatives
Now that we’ve established the cost of Chargify + Auth.net + merchant account, read Part 2 to see what to compare it to. After scanning the available options, we’ve decided to focus on Stripe and Braintree. Once we run the numbers, perhaps Chargify is actually the cheapest option? (Hint: No, it’s not…not by a long shot.) Read on to Part 2…
