Hi all,

We’re still hearing the feedback and we’ll write up a “postmortem” soon regarding how we (mis)handled this. A number of people have asked for something like that and I think we can learn from it and convey some lessons from which others may learn from our mistakes, too.

I just want everyone to know that it’s definitely not because of “greed” that we made this change. “Greed” to me would mean that we’re already making tons of profit and we just want more! That is not the case.

I updated an earlier blog post earlier today to add a tiny bit about this, but the reality is that our old pricing was going to bankrupt us – if not for the fantastic backing of Grasshopper Group.

To be clear, Chargify is NOT in financial danger – Grasshopper Group ensures that.

But Grasshopper Group has a reasonable expectation for Chargify to reach profitability sooner than later. With the old pricing, and the fact that the bulk of our merchants would be on it and the majority of them paying us $0 for quite some time, the future profitability was much too far in the future. It’s costing a lot of money each month to provide what Chargify is inside and out.

Back in mid-2009, when assumptions were made and prices were set, we thought small merchants would grow quickly, but on average, they don’t. And our revenue was very much tied to that growth. You get the picture. Someone said somewhere today that we should have figured this out sooner, that it should have been obvious that we can’t make money with our old pricing in a B2B market.

Well, we did see it sooner, but we waited too long to act on it. As a caller agreed earlier tonight, if we had merely said back in August, “Hey, we think we’re going to change pricing in a couple of months and it will be more expensive,” that probably would have helped a lot as an early warning to our merchants, even with no details.

Grasshopper Group has been supporting Chargify for 15 months, and Chargify is now supporting 3,000 merchants – again, the large majority of whom are paying $0. By asking most merchants to pay at least $39, and with larger merchants paying more, it places us on a much better path to profitability, which means a better company to support our merchants. Mind you, this change does not instantly make us profitable, it just makes the path better.

A note about Support (because people have mentioned its costs): Please bear in mind that even though some merchants don’t need any support or much support, it does not take a high percentage needing support to add substantially to our costs. Plus, we’d like to resist segregating our merchants into those who can call us and those who can’t. I’m not ruling it out someday if the market demands it, but we’d like to just offer good support to all merchants whenever they need it.

A note about Compute Resources (because people have mentioned that they’re cheap): It’s not the running software or “database rows” or CPU time that costs substantial money. Compute resources are cheap these days (although ours, because they’re in one of the best facilities in the country for financial transactions, are $5,000/mo min). Computers are relatively cheap.

What’s not cheap are people, and we have a substantial team here at Chargify and Grasshopper Group who are backing you up.

You can call our 800 number right now, at 11pm Eastern, and get a live US-based team that’s part of Grasshopper Group and that’s learning more about Chargify every day so they can do more L1 support. If something goes wrong on our network or servers, there are several people right now in the Grasshopper Group NOC in Boston who will be on it. And, of course, there are the Rails developers who work on Chargify software full-time, plus our L2 developer/tech support guy (who wrote the Chargify.NET package before coming on-board), plus our sys admin, plus the team working on our PCI Level I audit, plus countless other people who make everything happen – from Marketing and HR, to PR and Finance.

That is what you’re paying for, and until we’re making obscene amounts of profit, I definitely do not consider our motives to be the result of “greed”, but instead the result of wanting to make sure we are here for you, sustainably for the long-term, providing a great service with great people to back you up as your business grows.

That is why we made the change. I realize we messed it up and we should have gone about these changes differently, and for that, I sincerely apologize.

Finally, we definitely appreciate your ideas and feedback. We are listening and we will evolve with our merchants and the market, though we will definitely do things more carefully in the future.

Thanks.

—- Lance Walley, CEO
—- Chargify