How to Price Your SaaS

5 Rules for Pricing

After leading/supporting pricing projects at unicorn devtool companies like Vercel, Domino Data Lab, and Neo4j (and now a work in progress at Hypermode), I have five rules for pricing:

1. Pricing won’t be perfect. Get over it.

Don’t get stuck just because you can’t get to “perfect.” It’s not as final as you fear.

At Vercel, we tweaked the pricing in major ways 6+ times in my four years.

2. Save your innovation for the product.

Imagine two gas stations: one is “$3.99 per gallon” and the other is “$0.658 per pound”. Which are you filling up at? Pricing would be so distracting that you can’t evaluate if one is better quality.

Choose metrics that are familiar to your buyer. Pricing is a large part of how buyers understand your product.

When in doubt, just copy.

3. Don’t break PLG.

Pricing is all tradeoffs. You have to gate most of your product with a price, but you remove friction on one important thing:

Netflix doesn’t charge you more for each movie you watch. Twilio doesn’t charge you for your first texts. Airbnb doesn’t charge you to list your property

In SaaS, the tradeoff is usually seats vs usage, so do you want buyers to optimize for users or usage? Be thoughtful about what drives your viral loop.

4. Ensure your pricing doesn’t “break” by default

Per the last rule, did removing friction just break your margins?

Moviepass and WeWork are examples of this mistake and are now bankrupt. People love these companies, but their pricing models aren’t viable.

Do your Excel homework and be ready to iterate pricing as your buyers find exploits and edge cases you missed.

5. You can’t scale self-serve to large enterprises.

Big buyers (like Fortune 500s) want RFPs, bake-offs, custom legal terms, procurement processes, and other stuff startups are allergic to. You need a sales team to make this repeatable.

And if your product doesn’t have a tier that starts at $30k per year, you can’t afford a sales team.