It’s that time of year—when every SaaS company in existence decides to charge you more for the same thing.
I get it. Nobody likes waking up to an email that says, ‘Good news! We’re charging you more.’ But instead of reacting emotionally, we need to react strategically.
The real story here is divorcing yourself from the dollars, and reframing this in terms of return on investment (ROI), recognizing the hidden costs of switching tools, and building in systems to anticipate and even pass along expenses.
Today, I wanna share a few thoughts I have on this topic… Some that were foundational in my college business courses, some that I learned from helping run a small business in my previous career, and others that I had to push through on my own after starting my agency.
Personal & Business Finances Are Completely Different
Before diving into the numbers, it’s important to acknowledge that it’s totally normal to have a negative reaction to rising costs. Nobody likes it — and I’m not suggesting you celebrate the news.
But it becomes a problem for a lot of agencies when their personal and business finances are intertwined.
For a lot of us, there is little separation (if any) between our own finances and the business’s finances — but these two operate in very different ways.
When it comes to personal finances, every dollar is an asset you want to protect. You’re used to thinking about money in terms of saving for a big purchase, paying bills, or building up a safety net. Every dollar is precious, and when you have to part with it, you’re doing it at the expense of getting towards those goals.
Business finances, on the other hand, are driven primarily by ROI. Instead of thinking of the money in your business account as an asset, you can think of it as a tool. A tool that can help you generate even more revenue.
Think of it like this: Would you rather save $60 or land a $6,000 project? If that tool helps you work faster, deliver better results, or close deals more easily, then it’s paying for itself.
That doesn’t mean we should spend irresponsibly, but let’s put it in perspective here…
Web Agencies Have It Easy
It adds up — $200 here, $75 there, monthly and annual renewals… Feels like a lot, right?
And I’m saying this as the guy that even though I can afford not to, I still always shop the value menu at the drive-thru.
But zoom out a bit… In terms of business expenses, what we do is one of the lowest cost operations in existence.
When I decided I wanted to work for myself, my first idea was to quit my full-time job and open up a competitor in the print/sign industry.
But napkin math alone made it clear it was totally out of reach…
Even a tiny space would be thousands of dollars in rent each month. The cheapest equipment was more than a brand-new car (which I never owned!). And I wouldn’t be able to do it alone — which meant paying salaries, payroll tax, and insurance.
Instead, I started building websites in my spare bedroom, using a computer I already had, with less than $200/mo in software costs.
That’s it.
And that tiny overhead still allowed me to replace my previous full-time income—and eventually quadruple it.
It’s not unheard of for a freelancer or agency-of-one to have 70-90% profit margin before they pay themselves. Even now — 8 years in — my fixed costs are less than $1,000. Realistically, $1,000 in expenses can generate $10,000 to $20,000 a month in revenue.
That would have been literally impossible if I had opened a print shop.
The Forgotten Costs (what you should really worry about)
Not convinced? Still pissed your page builder license just jumped by 30%, and now you’re paying $260/yr instead of $200? Fine — let’s change tools.
But, remember, that’s not free either… Be sure to factor in these hidden costs:
1. Migration & setup
If you decided to make the switch, you’re in for an onboarding process at best, and a total rebuild at worst.
- Learning curves for a new interface, features, and workflows.
- Testing to ensure you can still accomplish all the things you were able to do before
- Updating your processes since everything is different now
- Lost efficiency as you build up new muscle memory
2. Opportunity costs
But while you’re doing all that, think about what you’re not doing:
- Prospecting and sales
- Marketing and networking
- Completing projects
- Billing
- Training / gaining skills
- Taking time off to recharge
Your time is finite — can you afford to spend more of it on things that don’t provide an ROI?
If your average project rate is in the thousands, ask yourself how many dollars of your own time you’ll sink into re-learning how you work and the opportunities you’ll miss just to save $60. If it’s anything more than one hour over the course of the next 365 days, you just lost money.
Let’s Do the Math Here…
As luck would have it, the pricing Gods decided to hand down a perfect case study to go along with this article, so this little section is being added about a week after this article was originally published — but I think it helps put a lot of this into perspective…
Postmark, a transactional email service, is reportedly increasing prices from $15/mo to $138/mo. As many of the members of The Admin Bar community use Postmark, this made big news inside the group.
After all, a 820% price increase is not subtle.
The conversation was mostly outrage and alternatives… but I decided to do a little bit of analysis before I jumped in those mosh pits.
I have about 60 clients on Postmark. Let’s say it takes 30 minutes per client to notify them, set up a new account, reconfigure all the DNS, and test (which is probably optimistic).
0.5 hours x 60 clients = 30 hours.
At $120/hr (my hourly rate), that’s $3,600 in migration costs.
SMTP2Go, which seems to be where a lot of people are heading, is $15/mo. Compare that to Postmark’s new pricing of $138, and that’s a difference of $123/mo.
That means it would take 29 months (2.5 years) to break even on the migration costs — assuming SMTP2Go never raises their prices in that time.
If the migration takes closer to 45 minutes per client, my actual cost jumps to $5,400, and the break-even point moves to 44 months (nearly 4 years).
But there’s another option here… What about passing these increases along to your clients?
If Postmark’s increase costs me $123 more per month, spreading that across 60 clients means I only need to raise my care plan prices by $2.05/mo per client to completely offset the cost.
Since that number is oddly specific, I’ll round it to $3/mo — keeping things simple and covering any minor fluctuations.
At that point, my total time investment is only 2 hours — updating invoices and sending a mass email to clients — instead of an entire week of manual migrations.
I feel a bit on an island with this thinking (since it sounds like everyone is just immediately jumping ship), but the math maths, right?
Obviously, your number of clients and hourly rate is different, so that changes the math for you — but I would encourage you to run this same scenario and see what it comes out to. Anything under a $5/mo price increase, and it seems like a no-brainer to pass along the costs and call it a day.
I’m not saying everyone should stay with Postmark, but you should take the 5 minutes it takes to do a bit of analysis to see how the math works for you before oyu make any decisions.
Many have made the moral argument of accepting our vendors doing these massive price-hikes — and I get that. I also prefer if they would keep prices low. But, it’s not my decision, and it’s not something I have any control over.
All I can do is assess the situation and make the best decision for my business and my customers.
Postmark has been rock-solid, and my business is heavily intertwined in their services. Other than the price, I have no reason to leave (in fact, I recommend their services any chance I get)… And when I run the math, the decision seems like an obvious one.
Earn > Save
If I can burn one memory in your brain from this post, it’s this: Your ability to earn more will always outpace what you can save.
When you put your time and energy into creating more revenue — landing bigger projects, improving your output, or simply passing those price hikes onto your customers — you stand to gain far more than any price hike threatens to cost you.
Costs increasing shouldn’t come as a surprise. As chaotic as the world has been, and as impossible as it is to predict the future — you can rest assured that rising costs will continue.
It’s the cost of doing business.
There’s a line, of course. It’s suggesting you should be wasteful or ignore your costs completely… But by shifting your perspective and focusing on ROI rather than costs, I think you’ll find it much easier to handle the occasional (and inevitable) bump in subscription fees — and make more thoughtful, rational, calculated decisions.
If a $60 price hike is truly jeopardizing your bottom line, it might be time to take a hard look at your business model instead of sweating software costs or chasing AppSumo deals.