Subscription seats or a fee at closing? The second one pays better and drags in licensing

Question

I'm sketching out how a lead platform should get paid and the two ends of the range behave completely differently.

Seats. Say $299 a month per investor for access to a filtered feed in their county. Revenue is predictable, I can forecast, and I never have to ask what happened after the handoff. The problem is that a seat holder who closes nothing churns in month three, and a seat holder who closes four houses off my feed pays me $3,588 for maybe $90,000 of assignment fees. I've capped my upside at the least profitable customer's willingness to pay.

Fee at close. Nothing up front, some agreed amount when a deal from my feed records. Aligns me with the outcome, the good customers pay a lot, the tire kickers cost me nothing but server time. Three problems. Tracking, because I'm relying on the buyer to tell me, and some won't. Cash flow, because I'm funding the whole platform on deals that close in 90 days if they close. And the one I keep circling: a payment tied to a completed real estate transaction can look like compensation for brokerage activity depending on how the statute reads in the state, and those rules and their exceptions differ state by state, so it's an attorney question in every market I'd operate in rather than a settled thing I can design around.

The hybrid, small seat plus small close fee, sounds like the obvious dodge, and I've watched two people try it and get the worst of both, a seat too small to fund the build and a close fee too small to chase.

So which do you build first, knowing you'll probably only get one shot at teaching your customers how they pay you?

kevin_lombard · Answer

Went through this twice and I still want to check something basic. In the close-fee version, how would you even know a deal came from your feed? If I saw a house on your site and then found the same owner through a mailer, whose deal is that? That seems like an argument every single month.

tylerbrooks9 · Answer

Seats. Boring, predictable, and you can build a business on it without a lawyer in every state you enter. The close fee sounds better on a spreadsheet and then you spend your life reading recorder data trying to catch people, which is a job I'd hate.

The $299 versus $90,000 comparison doesn't bother me the way it bothers you. Every software company in the world sells for a fraction of the value it creates. That's why people buy it.

ehernandez74 · Answer

Before picking, I'd want to know how long a customer stays. If average seat life is four months, $299 gets you $1,196 lifetime and you can't afford to acquire anyone, so the close fee starts looking necessary rather than greedy. If seat life is two years you never need to touch closings at all.

verity, I don't think the licensing point goes away with seats either, does it? If the seat gives access to seller contacts and I'm introducing parties for a fee, that's still a question worth asking an attorney in each state, just a milder one. halyard put the qualifier in the right place, I'd just apply it to both columns rather than one.

The hybrid failing twice is the most useful line in the post. I'd want the details of those two before I ruled it out, though. Failing because the mix was wrong is different from failing because the product was.

paulgrant17 · Answer

juniper's attribution question is the one that decides it for me. I spent all last month building a screening process and the lesson was that any rule you can't verify is a rule you don't have. If you can't prove the deal came from your feed, the close fee is a request, not a term.

Subscription seats or a fee at closing? The second one pays better and drags in licensing

4 replies