How to price your SaaS

Starting a Business

Table of Contents

Pricing your SaaS

Figuring out how much to charge folks to use your product is tricky. It’s kind of a dark art in a sense… you have to ask yourself how much you would pay for the product and go from there. Here are a few things to consider

How much it would cost to do it themselves

Most SaaS companies are out there solving problems for businesses or people. Oftentimes these problems are things that a person or company could do for themselves, but ultimately their time is better spent elsewhere.

Take Baremetrics for example. Sure, a business could export Stripe data and manually calculate metrics every so often in Excel. But this would take up hours and hours of a paid employee or founder’s time, and they wouldn’t get the benefit of always up-to-date metrics. So for a larger business, it’s not unreasonable to charge a few hundred dollars a month.

The cost of support and acquisition

Say you’ve just launched your business and your goal is to get to $3000 in MRR. There are a couple of ways to do that.

The first approach (1000 customers at $3/mo.) means you’re providing exponentially more support, and spending way more time acquiring those customers. And chances are, anyone paying $3/mo. is prone to churning.

So what do you do? Charge more. You’re much better off having a handful of customers paying you more a month.

Pricing tiers

You can generally assume that the larger your customer is, the more value they will get from your product. So price accordingly!

A lot of folks make the mistake of exclusively charging more based on features. This can be a viable strategy, unless you are feature-gating sticky features.

Sticky features are ones that prevent churn. Providing unlimited team members to all tiers is a great way to get more people at a company using your product, and thereby reducing their likelihood to churn. Similarly, email notifications are a great way to remind them of the value that you’re providing.

At Baremetrics, we charge folks based on their MRR. The bigger the company, the more value they’re receiving, and the more we charge. You’ll need to find a similar approach for your company.

Closing thoughts

As a general rule of thumb, if you’re a B2B charging less than $20/mo. for any plan, you’re going to have a bad time. If users refuse to pay more, then you’re not solving a big enough problem, and it’s time to head back to the drawing board.

Upcoming Lesson

Setting Goals

Goals! Knowing what your MRR is, but setting realistic goals and taking steps to meet them is another. We’re going to show you how to do just th...

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