SaaS pricing models: which one to choose and how to set your first price
Price is not the last line of the business plan: it is part of the product, and it pays to decide early.
What are the main SaaS pricing models?
There are six common models, and nearly every SaaS uses one or a blend. Stripe's documentation on recurring pricing models boils them down to four building blocks, flat rate, per-seat, tiered and usage-based; freemium and hybrid plans are built on top of those.
| Model | How it works | Works well when | Watch out for |
|---|---|---|---|
| Flat-rate | One price for the whole product | Every customer gets roughly the same value | Leaving money on the table with your largest customers |
| Tiered | Basic, Pro, Business: more features or higher limits at each step | You serve segments with genuinely different needs | Too many tiers confuse; the line between them must be obvious |
| Per-seat | Each user is a paid licence | Value grows with the number of people collaborating | Shared logins, and a brake on adoption inside the customer |
| Usage-based | Pay for what you use: API calls, documents, messages, minutes | Value tracks usage, and so does your cost | Bills that are hard to predict; usage must be metered precisely |
| Freemium | A free-forever tier with limits, plus paid plans | The product spreads by itself and a free user costs little | Many users who will never pay but still need support |
| Hybrid | A platform fee plus a usage or per-seat component | You want predictable revenue and a price that grows with value | Harder to explain and to invoice |
Pick the model early because it changes what you build: usage-based plans need metering for every customer (Stripe's usage-based billing docs show the moving parts: recording usage, prepaid credits, usage alerts), per-seat plans need invitations and licence management. Pricing belongs with the foundations covered in how to build a SaaS product.
What is a value metric and why does it matter?
- Value metric
- The unit that captures how much a customer gets out of your product, and that you charge for: seats, projects, clients managed, transactions, documents processed. A good value metric rises as the customer's value rises.
It matters because it decides whether your revenue grows with your customers. If value grows with the number of people working in the product, per-seat is natural; if it grows with the volume of work done, usage makes sense. A poor metric overcharges light users and undercharges your heaviest ones.
Three questions help. Does the customer understand it without explanation? Can they predict it before the invoice arrives? Does it rise when they get more out of the product? Three yeses mean you are on the right track.
How do you set the first price for an early-stage SaaS?
Start from the value to the customer and the alternatives they have, not from your costs. Costs set the floor, the price below which you lose money; value sets the ceiling.
A five-step method
Work out the floor
What it costs to serve one customer: infrastructure, third-party services, payment fees, support. The line items are in SaaS development cost.
Estimate the value
How much time or money the product saves or earns the customer, in their numbers rather than yours.
Map the alternatives
What they use today: a spreadsheet, a competitor, an extra hire. Your price will be judged against that.
Ask people to actually pay
Quote a price in interviews and pre-sales, and watch. If nobody ever pushes back, it is probably too low.
Revisit with data
After a few months, look at who converts, who stays and who asks for discounts. Change one variable at a time.
Should you sell monthly or annual subscriptions?
Offer both, with a discount on annual: monthly lowers the barrier to entry, annual brings cash up front and fewer moments to cancel. On retention, though, the gap is smaller than most founders expect.
90% vs 89%
In SaaS Capital's survey of more than 1,000 private B2B SaaS companies, multi-year contracts reach 94% median gross retention, annual 90% and monthly 89%. The bigger gap shows up with price level: above $250,000 in annual contract value, median gross retention is 95%, against roughly 91% below that. The authors put it down to higher-priced products usually involving longer sales cycles and deeper scoping of the customer's needs.
Freemium or free trial: which works better?
Choose a free trial when the value shows within days and the product needs some setup; choose freemium when the product spreads between users on its own and a free user costs you next to nothing. Freemium is an acquisition strategy before it is a pricing one: it only works if a share of free users upgrades.
It ties closely to product-led growth. If you sell subscriptions to consumers in the EU, online purchases generally carry a 14-day right of withdrawal, with exceptions for digital content; in the US, automatic renewal rules vary by state. Have a lawyer check how your checkout handles both.
How does selling through an iOS app change your pricing?
It changes because digital features unlocked inside an iOS app generally have to be sold through Apple's in-app purchase, which takes a commission. Guideline 3.1.1 of the App Store Review Guidelines spells this out for subscriptions and premium content, while the rules on external links and payments vary by country and keep changing.
For subscriptions, Apple states that you receive 70% of the price during a subscriber's first year and 85% after a year of paid service, minus taxes; members of the Small Business Program receive 85% from the start. Build that margin into your price: some SaaS companies charge differently in the app, others steer sales to the web where the rules allow.
When and how should you raise your prices?
Raise them when the product is worth more than when you set them: significant new features, customers who never push back, a waiting list. For new customers the change is simple; for existing ones, give plenty of notice and, if you want to reward early adopters, keep their old price for a while.
Measure the effect on two numbers: conversion of new customers and churn of existing ones. How to calculate them is in MRR vs ARR and SaaS churn rate; how acquisition cost compares with customer value is in the LTV:CAC ratio.
Frequently asked questions
How much should an early-stage SaaS charge?
Enough to cover the cost of serving a customer and to make buying feel like a real decision. Start from the value the product creates and the alternatives customers use today, then test it with pre-sales. A price that is too low attracts the wrong customers and is harder to raise later.
Per-seat or usage-based pricing?
Per-seat when value grows with the number of people collaborating in the product; usage-based when it grows with the volume of work and your own cost follows usage. Many SaaS products combine the two with a platform fee and a variable component. Pick the metric customers understand and can predict.
How many pricing tiers should a SaaS have?
Two or three are enough at the start: an entry plan, one for the typical customer and, if needed, a top tier with custom pricing. Every extra tier has to be explained and maintained. Add more once you see segments with genuinely different needs.
Should I show prices on my website?
If you sell self-serve, yes: a visible price cuts questions and qualifies leads. For negotiated plans, “contact us” is common, but showing a starting price still helps.
Do I need to decide pricing before building the SaaS?
The model, yes, because it changes what you build: metering, licences, plan limits. The exact price you test and adjust with your first customers. A well-built billing setup lets you change it without touching the code.
Sources
- Stripe Docs, Recurring pricing models (19 October 2026)
- SaaS Capital, 2025 B2B SaaS Retention Benchmarks (19 October 2026)
- Apple Developer, Auto-renewable subscriptions (19 October 2026)
- Apple, App Store Review Guidelines (aggiornate il 16 ottobre 2026) (19 October 2026)
- Your Europe (Commissione europea), Resi e diritto di recesso (19 October 2026)
- Stripe Docs, Usage-based billing (20 October 2026)
Figures and definitions checked on the dates shown.
