The skill: Arrive at a price that reflects the value you deliver, choose the right pricing model for your product, and present it without apologizing.
Pricing is the highest-leverage decision in your business. A 10% improvement in pricing has more impact on profit than a 10% improvement in customer acquisition or retention. Yet most founders set their price once, based on gut feel and competitor research, and never revisit it.
Choosing Your Model
The pricing model determines how you charge. Get this wrong and the sales conversation fights the product experience instead of supporting it.
Per-seat pricing works when value scales with the number of users. Every new user gets clear individual value. Slack, Figma, and most collaboration tools use this. It's easy to understand and easy to expand. Downside: it creates incentives to share logins.
Usage-based pricing works when value scales with consumption. API calls, data processed, messages sent. AWS, Twilio, and Stripe use this. It aligns cost with value perfectly, but makes revenue unpredictable for both you and the customer. Hard to sell when the prospect can't estimate their bill.
Flat-rate pricing works when the product delivers roughly the same value regardless of how much it's used. Basecamp is the canonical example. Simple to sell, simple to understand. Downside: you leave money on the table with heavy users and may overprice for light ones.
Tiered pricing combines flat-rate with natural expansion. 2-3 tiers based on features, usage limits, or team size. Most B2B SaaS lands here. The key: each tier should map to a different buyer persona or company stage, not just be "more stuff for more money."
Setting the Price Point
Start from value, not from cost. What does your product save the customer in time, money, or risk? Your price should be 10-20% of that value. If you save them $50K/year, $5-10K/year is a straightforward yes.
Get the prospect to quantify the value. During discovery, ask: "How much is this problem costing you? In hours? In revenue? In opportunity cost?" When they say the problem costs $100K/year and your product is $10K/year, you didn't set the price. They did.
Test higher than you're comfortable with. If nobody pushes back on your price, it's probably too low. You want a healthy minority of prospects to say "that's expensive." Zero flinches means you're leaving money on the table.
Use "early adopter pricing" instead of discounting. "In the future I'm going to charge $2,000/month. Because you're one of our first customers, I'm offering it at $500/month." The framing creates urgency and signals the product will be worth more, not that it's worth less.
Presenting Price
Always anchor high. Present the most expensive option first. Then walk down. You become the person saving them money rather than the person asking for it.
Three options beat one. Three tiers give the prospect a choice within your range instead of a binary yes-or-no. Most people pick the middle. Design accordingly: make the middle option the one you actually want to sell.
State the price, then stop talking. The silence after you say the number is the most important moment in the conversation. Don't fill it with justifications. Let them react. Their reaction tells you everything about whether the value landed.
Never apologize for your price. "I know it's a lot" or "we're a bit more expensive than..." undermines the value before the prospect has even processed the number. Say it plainly and wait.
Do's and Don'ts
Benchmarks
Quick Reference
- Price = 10-20% of the value you deliver. Get the prospect to quantify that value.
- Per-seat for collaboration tools, usage-based for APIs, tiered for most B2B SaaS.
- 20% of prospects should flinch. 0% means you're too cheap.
- Three options. Middle is your target. Anchor from the top.
- State the price, then shut up. Their silence is where the decision happens.
- "Early adopter pricing" > discounts. Same economics, opposite psychology.
- Revisit quarterly. Your product gets more valuable over time. Your price should too.
Written with ❤️ by a human (still)