How we created a great deal of cash flow

Annual payments and cash flow were closely connected for us at Dinero. I discuss our experiences from 2016, when a short message beside the subscription choice helped highlight the popularity of annual payments.

The video is from January 2016. Here, I discuss a change to Dinero’s subscription choices which, in my assessment, helped our cash flow.

Annual payments and cash flow: We received the money earlier

We had two payment options at Dinero: An annual subscription and a monthly subscription.

Historically, around 75 per cent chose the annual subscription, while around 25 per cent chose monthly payments. That was good for us as a small business because we needed the cash flow.

The annual subscription gave the customer a discount of around 25 per cent. In return, we received the money earlier, which was an important part of the calculation for us.

A higher price did not automatically mean better cash flow

We made a number of improvements that made Dinero easier to use. At the same time, we increased the price to cover the costs.

After the change, the discount for paying annually had fallen to just under twenty per cent. Customers’ choices changed too.

Suddenly, only around half chose the annual subscription. The rest paid month by month.

Even though we had increased the price, that change hit our cash flow hard. We received less payment at once and had to wait for the rest to arrive over the year.

If the business has plenty of money, you may prefer a higher total payment spread over the months. But for a small startup, when the money comes in can be crucial.

We changed a short message beside the choice

What we did was very simple. Beside the annual subscription, we wrote that it was the most popular choice. That information matched our customers’ historical choices.

So we did not change the entire product. We added a short message where the customer had to decide on the payment method.

My point in the video is that the small change affected our cash flow over the autumn. I believed we would otherwise have had to go to the bank and borrow money.

Small changes can matter a lot

I suppose that is what you call nudging: Giving people a little push in a particular direction when they face a choice.

For us, it was about making relevant information visible. Customers could still choose both annual and monthly payments, but they were told what most people had chosen.

It is a small tip from our own business. Sometimes you do not need a major new feature. A short message beside an important choice can also make a difference.

Also read Iværksætter til jeg dør for more of my experiences of running a business.