# A yearly plan from day one > Monthly and yearly plans side by side: the discount, the cash up front, how a yearly customer counts in monthly revenue, and what it does to the runway. - Course: [From Idea to Profitable Product: Building Without Investors](https://productovi.com/courses/bootstrapped-product.md) - Module: Sell before you build - Lesson 11/30, ~27 min - Source: https://productovi.com/courses/bootstrapped-product/a-yearly-plan-from-day-one ## Why a year at all? **Alex Tutor:** Still on pricing with GarageDesk's founders, whom you're advising with me. Today's idea is a yearly plan. **Sofia:** 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. ![Two corridors: one lined with many small side doors a customer could step out of, the other smooth with a single door at the far end.](https://productovi.com/courses/bootstrapped-product/inline/a-yearly-plan-from-day-one-illustration-2.webp) > **Exercise:** GarageDesk will charge repair shops 600 UAH a month, or 6,000 UAH for a year paid up front. Which are real reasons to offer the yearly plan from day one? Select all that apply. ## The math of 6,000 **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%”. ![Twelve months at 600 UAH is 7,200; the yearly plan is 6,000, ten months, so two are free. In monthly revenue a yearly shop counts as 500 UAH a month.](https://productovi.com/courses/bootstrapped-product/diagrams/m3-l3-two-months-free.png) *Cash arrives up front; plan by one month's share.* **Sofia:** 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. > **Exercise:** 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. **Alex Tutor:** So why not simply offer a bigger discount? > **Exercise:** GarageDesk costs 600 UAH a month or 6,000 UAH a year, which is two months free. Nina suggests half price for the year instead, to get more shops to pay a year ahead. What's the main problem with that? ## Cash is not income yet **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. ![A full piggy bank on a shelf holds a row of small sealed envelopes inside, with only the first one opened.](https://productovi.com/courses/bootstrapped-product/inline/a-yearly-plan-from-day-one-illustration-3.webp) *The bank shows a year of money; plan by one month's share.* **Alex Tutor:** 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:** Two shops have just paid for a year. How should the founders treat that money? > **Exercise:** Two shops pay 6,000 UAH each for a year, and 12,000 UAH lands in the bank. Which plan for that money is right? > **Exercise:** 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? **Sofia:** 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. > **Exercise:** 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)? ## Three months or a year **Sofia:** 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. > **Exercise:** Why does the pre-sale page offer three months for 1,800 UAH next to the year, instead of one month for 600? **Alex Tutor:** Nina's question about discounting the three months deserves a clear answer. > **Exercise:** **True or false:** to make the three-month option more attractive, GarageDesk should price it at 1,600 UAH instead of 1,800, with the monthly price at 600 UAH and the year at 6,000. ## Greg hesitates **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. **Sofia:** Can I write Oscar's answer? **Alex Tutor:** Please. Numbers, the refund date, and no pressure. > **Exercise:** GarageDesk's pre-sale offers a year for 6,000 UAH (instead of 12 × 600 = 7,200) or three months for 1,800, starting in March, with a full refund if it isn't live by 1 April. Greg, a repair-shop owner, 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. > **Key ideas** > > - Offer a yearly plan from day one: cash now, a stronger signal of commitment, one renewal decision a year instead of twelve. > - GarageDesk: 12 × 600 = 7,200 UAH vs 6,000 a year → 1,200 off, 16.7%, “two months free”. > - Discount % = (12 × monthly price − yearly price) / (12 × monthly price). > - Cash up front isn't a big month: in monthly revenue (MRR) a yearly shop counts as yearly price / 12 = 500 UAH. Spend by the monthly number, keep the rest as a cushion. > - Keep a smaller entry option (three months) for shops that won't pay a year; make the year visible, don't push it. **Alex Tutor:** Next: Oscar takes the page to twelve shops. The module case is what happens next. - Previous lesson: [Validate a SaaS idea with prepayment](https://productovi.com/courses/bootstrapped-product/prepayment-as-a-test.md) - Next lesson: [The first five prepayments](https://productovi.com/courses/bootstrapped-product/the-first-five-prepayments.md) --- Productovi Learning. Free, no sign-up needed to read.