How SaaS Founders Should Calculate Their Pricing (The Complete Guide)

Pricing your SaaS product is one of the most important decisions you’ll make — and one of the easiest to get wrong.

Most pricing advice focuses on models (tiered, usage-based, per-seat) or vague strategy. Very few guides explain how to actually calculate pricing in a structured, repeatable way.

This guide does exactly that.

Why Pricing Is Harder in SaaS Than Other Businesses

SaaS pricing isn’t a one-time decision. It affects:

• recurring revenue

• churn and retention

• customer acquisition

• expansion revenue

• long-term technical complexity

Changing pricing later is painful, especially if pricing logic is hard-coded into your product or tightly coupled to billing systems.

That’s why pricing should be treated as a system — not a number.

Step 1: Define the Customer and the Outcome

Before touching numbers, you must answer two questions clearly.

Who is this for?

Pricing varies dramatically between:

• solo founders

• small teams

• mid-market companies

• enterprise customers

Each segment has different budgets, buying behavior, and willingness to pay.

A price that feels “expensive” to a solo founder might be negligible for a larger team.

What outcome does your product deliver?

Customers don’t pay for features. They pay for outcomes such as:

• time saved

• revenue generated

• costs reduced

• risk eliminated

Strong pricing is tied directly to measurable results, not feature lists.

Step 2: Choose a Pricing Model (Structure, Not Price)

Your pricing model defines how customers pay, not how much they pay.

Common SaaS pricing models include:

• tiered pricing

• usage-based pricing

• per-seat or per-user pricing

• flat-rate pricing

• hybrid models (subscription + usage or add-ons)

The model should align with how customers experience value and how your costs scale.

Step 3: Look at Pricing Through Three Lenses

Effective pricing decisions come from combining three perspectives.

1. Cost-Based Pricing (Your Floor)

Calculate your baseline costs:

• infrastructure and hosting

• customer support

• maintenance and tooling

• customer acquisition

This establishes the minimum price required to sustain the business.

Cost-based pricing alone is not enough, but it prevents underpricing.

2. Competitive Context (Your Neighborhood)

Review competitor pricing to understand:

• typical price ranges

• plan structures

• feature packaging

This helps anchor your pricing within realistic market expectations without blindly copying competitors.

3. Value-Based Pricing (Your Anchor)

Value-based pricing is the most important lens.

Ask:

• How much time does this save the customer?

• How much revenue does it generate or protect?

• What happens if the customer does nothing?

Example:

If your product saves 5 hours per week:

• 260 hours per year

• at $100/hour value

• that’s $26,000 in annual value

You don’t charge the full value — you capture a portion of it.

Step 4: Calculate Pricing Using Value Capture

Step A: Estimate Annual Value Delivered

Quantify the real impact:

• hours saved

• costs avoided

• revenue unlocked

• risk reduced

Be conservative and realistic.

Step B: Choose a Value Capture Percentage

Typical ranges:

• low-impact tools: 10–20%

• productivity tools: 20–40%

• mission-critical software: 40–70%

Using the $26,000 example:

• capturing 30% results in $7,800 per year

Step C: Create Logical Pricing Tiers

Each tier should represent a real increase in value — not arbitrary feature gating.

Example:

Step 5: Validate Pricing With Real Customers

Before finalizing pricing:

• talk to prospects

• test pricing ranges in conversations

• ask what feels “too cheap” or “too expensive”

• observe reactions during sales calls

Pricing feedback is most valuable before launch, but should continue over time.

Step 6: Test, Measure, and Iterate

Pricing is not static.

Track:

• conversion rates by plan

• churn by price point

• expansion revenue

• annual vs monthly adoption

Treat pricing like a product experiment and adjust as your product and market evolve.

Common SaaS Pricing Mistakes to Avoid

• Pricing purely based on costs

• Copying competitors without understanding value

• Offering too many plans

• Making pricing changes without versioning

• Hard-coding pricing logic into the product

These mistakes compound over time and make future pricing changes expensive and risky.

A Simple Pricing Calculation Framework

1. Estimate annual customer value

2. Choose a reasonable value capture percentage

3. Calculate price = value × capture percentage

4. Create tiers based on meaningful value differences

5. Validate with customers

6. Test and refine over time

Final Thoughts

Great SaaS pricing is intentional, measurable, and flexible.

When pricing reflects real customer value — and is treated as a system rather than a static page — it becomes a powerful growth lever instead of a constant source of friction.

If you get pricing right early, everything else becomes easier to scale.