🚀 Starting a Business

Noah Kagan's 20% Rule: Stop SaaS Pricing Gouging

Noah Kagan proposes a new law for software price hikes. Here is how to protect your data before costs spike.

By MyBizNerd Team · Published

Key Takeaways

  • Software companies that raise prices by more than 20 percent should be legally required to provide a one-click data export tool.
  • Noah Kagan recently highlighted Evernote as an example of a tool where users feel trapped by rising costs and difficult data migration.
  • Small business owners can protect themselves by choosing tools with open export formats like CSV or JSON before they sign up.
  • You can file a formal complaint with the Federal Trade Commission (FTC) if a vendor uses unfair practices to prevent you from canceling or moving your data.

Say you run a 6-person landscaping business in Charlotte. You've used the same scheduling and billing software for four years. Suddenly, the vendor sends an email: your monthly bill is jumping from $150 to $225. That's a 50 percent hike. You want to leave, but you realize all your customer history, photos of completed jobs, and billing records are trapped in their system. Exporting it requires a manual process that would take your office manager forty hours. You aren't a customer anymore. You're a hostage.

This friction is exactly what entrepreneur Noah Kagan said on X recently. He argued that there should be an internet law requiring any SaaS (Software as a Service) company raising prices more than 20 percent to let you export everything in one click. He specifically called out Evernote, a popular note-taking app that has faced criticism for steep price increases and making it difficult for long-time users to move their data elsewhere.

Why your data portability matters

When you start a business, you focus on features and monthly costs.

You rarely think about the exit. But in a world where software costs can fluctuate, your ability to leave is your only real use. If a vendor knows it will take you three weeks to move your data, they can raise prices with total confidence that you'll just pay the bill.

  • Check for CSV exports: Before you pay for a subscription, look at the settings. Can you download your customer list into a spreadsheet? If not, don't put your data there.
  • Avoid proprietary formats: Some tools export files that only their own software can read. This is a trap. Look for universal file types like.csv.pdf, or.json.
  • Audit your subscriptions annually: Small businesses often suffer from "subscription creep." A $20/month tool here and a $50/month tool there can quickly turn into a $1,000 monthly drain on your cash flow.

What this means for you: If a tool doesn't make it easy to leave, it doesn't truly value your business. Only give your data to vendors that let you take it back.

The legal side of unfair pricing and lock-in

While there's no federal law yet that forces a "one-click export" for 20 percent price hikes, the government is paying closer attention to how companies lock in customers. The Federal Trade Commission (FTC) investigates unfair or deceptive acts. If a software company changes its terms so drastically that you can no longer access the data you paid to store, they may be crossing a legal line.

Also, if you're a solo operator or a small crew, you should know your rights regarding service contracts. The Consumer Financial Protection Bureau (CFPB) often looks into how "fine print" in digital contracts can strip away your ability to switch providers or seek refunds.

Common questions about switching software

Is a 20 percent price hike normal for small business software? It's becoming more common as companies face their own rising costs. However, a jump of 20 percent or more usually signals a change in the company's target market. They might be trying to get rid of "small" users to focus on big corporate clients. If you see this, it's time to look for a competitor who still wants your business.

What if the company says I 'own' my data but makes it hard to download? Ownership without access is an illusion. If you cannot get a clean file of your records without hiring a programmer, you don't effectively own that data. Always test the export function during a free trial period before you enter your credit card information.

Are you currently paying for a tool that you're afraid to leave because your data is stuck?

📋 Disclaimer

This article is for informational purposes only and does not constitute legal, tax, financial, or professional advice. Laws and regulations change frequently, and the information presented may not reflect the most current legal developments. Always consult with a qualified professional (CPA, attorney, financial advisor) before making business decisions based on this content. MyBizNerd may receive compensation through affiliate links, but this never influences our recommendations.