Every founder building a SaaS eventually hits the same wall: what do I charge for this? Most pricing content online assumes you already understand the vocabulary — "value-based pricing," "willingness to pay," "expansion revenue," "net dollar retention." If you're a first-time founder trying to figure out whether to charge $19 or $79 for your product, most of that content is unusable.
This post is the practical framework I walk founders through when they've never priced a product before. It doesn't require any pricing expertise, and it produces a defensible first number that you can improve later.
First: understand that pricing is a decision, not a discovery
Founders often act like there's a "correct" price for their product waiting to be discovered through research. There isn't. Pricing is a decision you make about how you want your business to work — what kind of customers you want, how much support you want to provide, how much acquisition cost you can absorb.
Two nearly-identical products can succeed at wildly different prices depending on the strategy behind them:
- Product A charges $19/month, targets millions of small users, competes on ease of use, has minimal support, and grows via viral loops.
- Product B charges $299/month, targets fewer larger users, competes on completeness, has dedicated support, and grows via sales outreach.
Neither is "right." They're different businesses. The pricing choice IS the business choice.
The mistake: trying to guess the right price without first deciding what kind of business you want. The right first question isn't "what should I charge?" — it's "who am I selling to, and what does that customer expect?"
The 5 questions that determine your pricing shape
Before picking a number, answer these:
1. Who is the buyer?
Not the user — the buyer. The person who says yes to spending money.
- Individual buyer (freelancer, solo professional): expects to pay $5-50/month. Above $100/month feels expensive without exceptional value. Above $500/month is nearly impossible.
- Small business buyer (owner or team lead at a company under ~50 people): expects to pay $50-500/month. Willing to pay more with clear ROI story.
- Mid-market buyer (department head at 50-500 person company): expects to pay $500-5,000/month. Wants sales conversation, contracts, invoicing.
- Enterprise buyer (VP or C-level at 500+ person company): expects $5k-50k+/month. Multi-month sales cycle, procurement processes, security reviews.
Each tier has completely different expectations, sales motions, and pricing psychology. Trying to serve multiple tiers with the same product usually means underserving all of them.
2. What replaces the pain of paying you?
Every customer asks (consciously or not): "what's the pain of paying you vs the pain of NOT paying you?"
- Time saved — how many hours per week does your product save the user? Multiply by their hourly rate. That's the theoretical ceiling.
- Revenue enabled — does your product help them make more money? If so, they can pay a percentage of that upside.
- Cost avoided — does your product prevent bigger costs (fines, mistakes, hiring more people)? They can pay a fraction of what's avoided.
- Risk reduced — does your product protect them from something bad? Insurance-adjacent pricing applies.
- Status/identity — does your product make them look good to their team, boss, or customers? Some willingness to pay lives here.
The strongest pricing story combines two or more of these. "Saves you 10 hours a week AND makes you look competent to your boss" is a much stronger case than either alone.
3. How often do they use it?
Frequency of use drives what pricing model works:
- Daily use — SaaS subscription works well. The user sees the value every day, so a monthly fee feels justified.
- Weekly use — SaaS subscription still works, but you need onboarding and re-engagement flows to stay top-of-mind.
- Monthly or occasional use — subscription is hard. Consider per-use pricing, pay-as-you-go, or one-time purchase.
- Rare / crisis use — insurance-style pricing. They pay to have it available when they need it. Small monthly fee, higher fee per use.
Founders often force subscription pricing on products that get used occasionally. Users churn quickly because the value/pain ratio doesn't match. Rethink the model.
4. How much support do you want to provide?
Support cost is baked into your pricing whether you notice it or not.
- Self-serve, no support — works at prices under $50/month. Customers expect docs, videos, community. Any human support is a bonus.
- Chat support, business hours — works at $50-500/month. Customers expect responses within a business day.
- Dedicated account rep — needed at $500+/month. Customers expect a human they can call.
- Onboarding services / implementation — needed at $2k+/month. Customers expect white-glove setup.
The trap: charging $19/month for a product with the support expectations of a $500/month product. Every conversation eats your margin. Either raise the price or automate the support.
5. How does the customer find you?
Your acquisition model constrains your pricing more than founders realize:
- Product-led (SEO, viral, freemium) — cheap acquisition, so lower prices work. $10-100/month range.
- Content-driven — moderate acquisition cost. $50-500/month range.
- Paid ads (Google, Meta) — moderate to high acquisition cost. Needs prices high enough to recover CAC in 3-6 months, so typically $50+/month.
- Outbound sales — high acquisition cost. Every deal needs to justify the salesperson's time. $500+/month minimum for it to make sense.
If you're pricing at $19/month, you can't afford salespeople. If you're doing outbound sales, you can't afford to charge $19. The two don't match.
The 5 SaaS pricing models
Given the answers above, pick a model. There are five common ones — the right one depends on your product shape.
Model 1: Flat monthly/annual subscription
"Pay $49/month, get everything."
Best for: simple products with one clear use case. Individual professionals or small teams.
Pros: easiest to explain, easiest to buy, predictable revenue.
Cons: hard to price-differentiate customers who use a lot vs a little. Leaves money on the table with power users.
Model 2: Per-seat pricing
"Pay $19/user/month."
Best for: collaborative products used by teams. When each additional user adds value for the team.
Pros: scales with customer size. Aligns with how they perceive value.
Cons: creates friction to add users (finance vs product decision). Customers game it (sharing logins).
Model 3: Tiered plans (Good/Better/Best)
"Basic $29, Pro $99, Enterprise $299."
Best for: products with clear feature differentiation across customer segments.
Pros: captures more of the value curve. Gives customers a "choice" that anchors them to the middle tier.
Cons: requires real differentiation between tiers. If the tiers are arbitrary, sophisticated buyers notice.
Key rule for tiers: the middle tier should be where most customers land. If everyone picks the cheapest tier, your tiers are broken.
Model 4: Usage-based pricing
"Pay $0.01 per API call" or "Pay $5 per 1000 emails sent."
Best for: products where usage varies dramatically between customers. Infrastructure, APIs, communications.
Pros: scales perfectly with customer size. Small customers pay small; big customers pay big. Aligned incentives.
Cons: unpredictable revenue. Customers hate unpredictable bills. Requires excellent usage tracking + billing infrastructure.
Hybrid: many usage-based products add a base fee + overage ("$99/month includes 10,000 emails, then $0.005 each after"). Best of both worlds.
Model 5: Freemium
"Free forever with limits; $29/month to remove them."
Best for: products with viral loops or where users become advocates for the product to their team/company.
Pros: low friction to acquire users. Free users often convert to paid or drive paid customers.
Cons: support cost of free users. Very few products actually convert freemium at a good rate. Most freemium businesses are actually free-with-a-hopeful-paid-tier.
The realistic freemium conversion rate is 2-5%. If you're planning a business around freemium, do the math at 2% conversion, not 20%.
Setting your first number: the anchor method
You've picked a model. Now you need an actual number. Here's the process:
Step 1: Find 5 comparable products. Not identical — comparable. Products serving a similar buyer with similar value. Note their prices.
Step 2: Note the range. Let's say your five comparables charge: $29, $49, $79, $99, $149/month. The range is $29-149; the middle is around $75.
Step 3: Position yourself in the range.
- If your product is clearly better than most: price near the top of the range.
- If your product is comparable: price near the middle.
- If your product is more limited but easier to use: price near the bottom.
Do NOT price below the bottom of the range. Founders often think "I'll be cheapest to win customers." What actually happens: cheap prices signal low quality, attract price-sensitive customers who churn, and leave you with no margin to invest in the product.
Step 4: Pick a specific number in your position. Not $75 — $79. Prices ending in 9 (or 5, or 7) test better than round numbers. This is well-documented.
Step 5: Ship it. Do not spend three more weeks agonizing. First price is always wrong; you'll adjust.
The most common pricing mistakes
Mistake 1: Pricing too low because you're insecure about the product.
Signal: you're afraid people will laugh at your price. So you set it low to be "reasonable." What actually happens: the low price signals to buyers that you're not confident, and they don't take you seriously.
Fix: price at the middle of your comparables at minimum. If nobody buys, that's data — not proof your instinct was right.
Mistake 2: One price for everyone.
Signal: you have one plan at one price. What actually happens: you leave money on the table with big customers and price out small customers.
Fix: add tiers. Even three levels (Basic / Pro / Enterprise) captures much more revenue than one level.
Mistake 3: Confusing pricing pages.
Signal: your pricing page has 8 columns of feature comparisons, footnotes, "call for pricing" tiers, and 3 different currency toggles. What actually happens: buyers can't tell which plan to pick and don't buy at all.
Fix: three plans, three price points, three simple lists of what's included. Cross out what's NOT included in each tier so it's visible what you get by upgrading.
Mistake 4: Never raising prices.
Signal: your prices haven't changed since launch, but your product has 3x more features and better performance. What actually happens: you're capturing less value each year. New competitors price higher and enter the market with more resources to invest.
Fix: raise prices every 12-24 months. Grandfather existing customers for 6-12 months, then transition them up. Yes, some will churn. Most won't — and the ones who do weren't your best customers.
Mistake 5: Discounting reactively.
Signal: whenever a prospect pushes back on price, you offer a discount to close the deal. What actually happens: word gets out, everyone asks for a discount, your prices become fiction.
Fix: hold your prices. Discount only for specific reasons (annual commitment, volume, education/nonprofit). Never for "I don't want to pay full price."
Raising prices later without losing customers
This is where founders get scared. Here's the honest playbook:
1. Grandfather existing customers. Announce a new price for new customers. Existing customers keep their current price for a defined period (6-12 months).
2. Add value simultaneously. Ship a meaningful new feature at the same time as the price increase. Frame the price change as reflecting new value, not just extraction.
3. Communicate early and clearly. 60-90 days advance notice. Explain the reasoning. Offer a way to lock in the old price with an annual commitment.
4. Expect 3-8% short-term churn. Some customers will leave. Most won't. The customers who leave are usually the least profitable ones anyway.
5. Watch the metrics that matter. Revenue per customer should go up more than churn goes down. If it does, the price change is working.
What to do this week
Answer the 5 questions above about your product. Write down the answers. Be honest — no aspirational answers.
Pick a pricing model based on your answers. If you can't decide between two, pick the simpler one — you can always add complexity later.
Find 5 comparable products and note their prices. Not marketing prices — actual paying prices. Sign up for their trials to see the real page after login sometimes has different pricing.
Set your price using the anchor method. Middle of the range, ending in 9 (or 7 or 5).
Ship it. Don't wait for perfect. First price is data-generating; adjust in 3-6 months based on what you learn.
If you're still figuring out what your product should even be — before pricing enters the picture — the free MVP planner tool on this site helps produce a realistic scope. And if you're not sure whether your product is close enough to right to price at all, the refactor vs rewrite framework covers the prior question honestly. Pricing follows product; product follows customer.
Pricing isn't a math problem. It's a strategy problem. The founders who get pricing right aren't the ones with the best spreadsheets — they're the ones who chose a specific customer, understood what that customer would pay, and stuck to it.
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If you'd like a second opinion on your specific pricing before you set it (or before you raise it), reach out via the contact page with your product URL and a note about the customer you're targeting. I'll spend 30 minutes on it and tell you what I'd do differently.