Ledgerline Software (McKinsey)

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• The share willing to subscribe falls from 90% at US$20 to 45% at US$40; the steepest drop is between US$30 and US$40.

• US$20 × 90% = US$18.0
• US$25 × 80% = US$20.0
• US$30 × 70% = US$21.0
• US$40 × 45% = US$18.0

US$30 earns the most per customer, but loses 30% of the base; US$25 earns 5% less and keeps 10 points more customers. Surveys tend to overstate willingness to pay, so the true share at each price may be lower. Before choosing, Ledgerline needs to compare this with what a customer is worth today.

• License: US$600 ÷ 5 years = US$120
• Support: 50% × US$120 = US$60
• Total: US$180 → 200,000 customers × US$180 = US$36M per year

• US$30 × 12 = US$360, minus hosting US$5 × 12 = US$60 → US$300
• Subscribers: 200,000 × 70% = 140,000 → 140,000 × US$300 = US$42M per year, about +17%

• Ledgerline needs a share of customers kept of US$180 ÷ US$300 = 60%, so it could lose up to 40% (80,000 customers). The survey suggests 30%, a buffer of 10 points.

The subscription pays off if the survey holds, but the buffer is not large given that surveys tend to overstate demand. Strong candidates add that the gain comes only after the transition: license revenue stops at once, while subscriptions build up as licenses expire.