So you have a platform, you’ve tested it, and you’re ready to roll it out to the world. There’s one question you need to answer before you can hit the market: What does your service cost? You can search the web and find dozens of different pricing strategies that won’t work, or you can price your service based on how you market it and what you know it is worth. Pricing SaaS is one part of the business that doesn’t come from a formula or a spreadsheet. As CEOs, we know what our price should be, and we need to make the decision to price our services accordingly based on the following key factors.
At this stage of business, you should have a handle on who your customers are going to be and what benefit you are going to bring to them. Most SaaS companies make the mistake of catering more to their own needs instead of focusing on the needs of their future clientele. SaaS only works when you build strong relationships with your partners, and those relationships can’t thrive and develop if your underpricing or overpricing your service. If you are going to provide service to consumers you will have a much different pricing structure than you would if you were providing enterprise software.
Value Creates Pricing
If you don’t know what value your service will provide to your partners, how will you be able to price it? In short, you won’t. If you know you can provide $10,000 in value, your pricing model will look much different than if you can provide $100,00 in value. The value you are able to provide is not something that can go on a client spreadsheet and be claimed as ROI. You are providing a solution to a problem, so the real question is: How much money is that problem causing the company? The initial conversations you have with the client are critical to understanding where they are losing money and how your product comes into play. The more knowledge you can gain on your client, the easier it will be for you to help solve their problems.
Change is Inevitable
When you are pricing your service, you need to understand that there are plenty of factors you still don’t know about your own business, let alone the businesses you’ll be working with. The SaaS industry is constantly changing and evolving, and you need to prepare for those changes before they happen. Your price should shouldn’t have to change every time something changes in the industry, so come with a strong price out of the gate that will still be viable a year from now when the scope of SaaS is totally different.
The number of entrepreneurs who price their SaaS platform incorrectly is astonishing. A lot of companies forget about the basics and complicate their pricing model by trying to use variables and formulas to come up with the perfect price. Stop looking for the perfect price, and start looking for a price that will be mutually beneficial for you and your customers.