Building in Public: Pricing is our Scariest Decision

Introduction

Building in Public is a blog series where we transparently describe what we are doing and why. As a bootstrapped company that has struggled to find advice for those of us that do not want to make the next unicorn, we hope our successes and failures will be helpful for others.

While building Terrateam, pricing has been one of the scariest decisions we’ve made. We have a lot of pride in what we’ve built. It doesn’t matter how many people say they like your product when you show it to them, the rubber meets the road when they have to give you their credit card.

Early Pricing Strategy

At first, we just tried to copy the pricing of companies that we thought were our competitors. We didn’t know what we were doing, but they probably did. Take what they have and make a slight tweak to showcase what we think makes us special. We also asked for advice from a lot of people, but it was hard to get an answer to “why” they recommended a price to us. A lot of the advice just seemed like “sounds like something that should cost $X.”

Initial Customer Acquisition

To get our first paying customers, we went low. We looked at the cheapest non-free plan of our competitors and undercut it by 30%. And it worked! We started getting paying customers. But defining the value of your product purely based on the value of another product leaves an uneasy feeling. We didn’t want our product to just be a cheap copy of another. We had our own vision.

Shaping Our Vision

We knew that we didn’t want to create a billion-dollar company. We just wanted to solve our customers’ problems and make enough money to enjoy life. Early in our formation, we read Company of One by Paul Jarvis. Company of One is for entrepreneurs that are happy creating a small, steadily growing company. In other words: us. One of the biggest takeaways for us was about finding your market. A large company needs to appeal to a lot of people, but a small company has more freedom to have a personality. We can be really appealing to a smaller group of people at the expense of being a turn-off to others.

Understanding Our Market

We believe there are users that want a really good experience planning and applying their Terraform changes and will pay for support and SLAs. Our vision for Terrateam is a product for people who are happy never leaving GitHub for Terraform changes. We want very few touch-points with the product. Once it is set up, it should become invisible. In their day-to-day usage, our customers see almost no branding. All Terrateam configuration and operations are done inside the repository or through pull requests. We don’t have a UI. Users create a pull request, see their Terraform plan in the comments, and then apply it in the pull request. There is no reason to leave. And we have a ton of features! So how much should that cost?

Pricing Revisited

We aren’t flashy. But we are feature-rich. We are focused on a specific use case: Terraform plan and apply on GitHub. Being bootstrapped, we are very lean. We’ve implemented 70%-80% of the enterprise features of the competition but on a shoestring budget. We’re a small company that doesn’t have investors to repay. We want to stay small while maintaining our high quality of support, so we can’t have too many customers. Finally, we don’t even need to make a million dollars in revenue per year to be a success.

Realizing Our True Competition

That’s when we realized that we didn’t know who our competition was. There are the popular names in Terraform CI/CDs, and we just assumed they were our competition. But they are rocket ships. They are after those enterprise contracts that are thousands of dollars per month. We don’t think your Terraform CI/CD should be so sophisticated that it should cost that much.

The Latest Pricing Iteration

With all that, the latest iteration on pricing is: $496/mo. We provide most of the enterprise features our users want at 1/10th the cost of the other options. With no GUI, the experience is more utilitarian, but you get the information you need in the place where you already are. We’ve only recently rolled out this change so we are still evaluating it. If history is any indicator of the future, we’ll be iterating on pricing again.