When I first started business, I was all about what I could do for free. I spent hours researching the free and cheapest tools available. I stalked AppSumo, and asked in groups.
I’ve realized that in some cases, free can be good, but it’s not always as good as it seems. And I got burned a few times and wished I had been paying for the premium software.
My personal definition of frugal is being smart with money. And one of the lessons I’ve learned is that it doesn’t pay to spend hours to save pennies.
Yet, when you’re just starting out, or still pretty new in your business, you may not have the cash flow for the ideal tools. I too remember when I didn’t have the $200 for a yearly subscription that would make my life much easier. Free tools can seem like a good option, but be careful, and be ready to change tools when needed.
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Payment structures to think about
I hesitate now to use tools that are 100% free. The only way I will use these 100% free tools now is if I can see how the owner/creator will make money.
Will they be showing me ads? How often? I don’t mind this method because I’m pretty good at ignoring ads, and I know the company will be around for a while. But if you hate ads, or they interfere with the use of the software, they can be extremely frustrating.
If I don’t see any way of earning, I’ll probably assume the worst – they’re selling my data in ways they’re not disclosing, and I don’t want to be part of that.
Freemium – Limited Free Plan
I really like this model. A company offers a free product, but charges for additional features, expanded size, or removal of ads. To me, this is a much better way to try out a product than a 14-day free trial. A great example of this is Screetcast-o-matic.
I can get behind this free offering because I know that the software can be supported. It’s so much less risk than a 100% free tool.
To me, the very best is the freemium software that helps your business make money. If the software can tempt you with premium features and it’s free version can help you earn enough to afford the paid version, that’s a winner.
Free trials sound great, but only if you’re already 99% sure you want to buy a product and need that 1% boost to your confidence.
They can also make sense for tools that don’t need a lot of time investment to learn, or where there isn’t a big cost in switching providers. A free trial for a social media automation platform makes sense because you should be able to connect up your accounts and get going.
But for tools like team project management, a free trial only makes sense if you really plan on purchasing it as long as you don’t see a huge flaw during the trial. Setting up, moving your team, and learning the new environment all take so much investment that you can’t really move just to try it out.
One Time Fee
Now we’re getting into the paid solutions (and this could be the paid versions of tools that also offer free versions). The best things about the paid solutions is that they’re more likely to be around in a few months and they generally will offer better support.
The thing I like about one time fees is that I know I can save up for them and purchase them when I have the funds. They’re pricier upfront of course, but I like knowing what I have to save.
Pay Per Usage
Paying for software per usage makes a lot of sense from the provider’s point of view, but can be really tough to budget for.
Web hosting can be sold this way, and just like your utilities bills, you can use more than you mean too without realizing it. If you experience a huge surge of visitors that’s not monetized in any way, you could be in trouble if your hosting charges by amount of traffic.
Recurring subscriptions are great because you know exactly how much you’ll be paying each month. They’re generally good for the providers as well because they help tremendously with cash flow.
So Is Free Worth the Risk?
I find that I really want to know where companies are making their money. If I understand how the software maker is compensated, then I generally feel like the risk is low.
If you don’t know how a company is getting paid, however, then you don’t really know how big of a risk you’d be taking, using their product. Do they have a paid version? Are they hobbyists with a trust fund? Or do they have no business plan and no way to stay in business?
You want tools from a company that is making money somewhere. If they’re not, you have a few problems:
- They won’t stick around when you need them because they’ll be bankrupt
- They won’t offer the kind of support you need, and can leave you stuck
- You can’t count on them to keep their software updated regularly, and that could be a security risk.
If you can’t see how they’re making money, and they won’t tell you, then it’s probably from your data. I’m not always opposed to that if I know upfront what they’re doing with my data. I don’t like it when companies aren’t transparent about that.
Free to Paid Models
If you’re selecting (or even setting up) a tool’s free model, be sure you know the conditions under which you might be charged.
Look for a very clear line, indicating when you have to start paying. You don’t want to be surprised.
Aside for tool creators: if you’re considering a free plan when you’re building a software tool or service, make sure you’re making money somewhere else. Avoid changing the rules mid-stream. I hate it when a freemium model product changes its features and I lose what I have. Make the free product small enough so that doesn’t happen. It really sours the concept of the whole product.
I was using a free proposal and invoicing platform a few years ago. It had a bigger paid plan, but I didn’t need any of the paid features. When they changed the rules, I had to keep paying for what I was already using or move. I moved.
The funny thing – I moved to a higher cost platform. Even though their service was worth what they were asking, the unexpected change from free to paid soured the solution for me. What else could change without much warning? I realize that’s not entirely rational! But in general, people hate it when you take things away, me included.
So, you can use free tools if you accept the risks. But remember that free doesn’t always cost less. The lost productivity and the unreliability risks from free tools can mean big costs at unexpected times. Think through your tool decisions and don’t always jump for the free version.