- Hi, I'm Dan Martell, serial entrepreneur,
investor and creator of SaaS Academy and in this video
I'm gonna share with you how to perfect your SaaS pricing.
And be sure to stay to the end where I tell you how to get a
copy of my Rocket Demo Builder.
If you're doing product demos,
this framework will help you crush those.
(upbeat music)
So when it comes to pricing your SaaS business
it is one of those black arts, okay?
This framework is specifically focused on the early days.
I remember I was building my company Flowtown.com,
we had just raised a bunch of funding and I was trying to
figure out how should we price our product for a social
marketing application for email.
You'd give us email addresses,
we'd add social data on top of it.
And we were like should we charge one cent per email?
Should we charge five cents per email?
Should we charge $20 a month?
Should we up that to $100 a month?
Because the truth is if you think about pricing it says a
lot about the product.
Ask somebody what they feel about a product without
mentioning the pricing is like asking somebody to buy a pair of
jeans without trying them on.
It really makes no sense because
we don't know if it's gonna be a fit.
You know, one of the things that I get to do when I coach
software founders is to look at their current pricing structure
and their adoption rate and just offer some quick advice.
I mean at a low hanging fruit opportunity level every one of
you watching this could probably raise your prices by 20%.
That's the low hanging fruit.
I'm actually gonna give you the three steps and really it's a
formula for figuring out your pricing fast in the early days.
Step number one, 10X value.
I remember one time I was listening to a podcast and the
founder was explaining their pricing structure and they
started at $1,000 a month.
Now for most B2B SaaS businesses,
that's on the high end.
Most of them are kind of $197 and onward and their argument
from the founder was that they were a QnA software so
essentially they allowed companies
to reduce their deficiencies.
And their argument was that for $12,000 a year we help them save
one full time engineer's cost.
And I don't know about you but in most major cities
we're talking six-figures.
So $100,000+, $120,000.
So they passed the 10X Value.
So you need to ask yourself, it doesn't matter if it's
$30 a month or $100 a month is can you get every customer to
perceive and feel 10X value.
Number two, 5% more.
One of my quick rules of thumb is that every time you talk to a
customer in the early days, just raise your prices by 5%.
Now some people are like, "Dan, that's crazy.
"We're gonna get out of whack really quick."
Look here's the deal is maybe you do it every 10 customers but
if you're not continually testing the next price level,
look, your product's changing.
You're adding new features.
You're creating more value for your customers.
So by increasing your prices by 5% you're gonna start testing
the upper limit of what customers are willing to pay for
and that just sets the process and team structure to think
about how does our product add value and
can we justify the increase in price?
But like I said, most of you guys are underpricing
so just start there.
Do it for the next 10 customers.
See if there's any push back and keep going onward.
Number three, 20% push back.
So, yes, increase your prices by 5%.
Maybe you want to do it for every net new customer or you
want to do it in blocks of 10 or if you're feeling a little
afraid you go blocks of 50, whatever your jam is but the key
is to keep pushing up until you got 20% or so of the customers
pushing back and saying no.
I can remember talking to a founder once and they were like,
"Everybody we talk to has bought the product."
And I'm like, "Put your prices up."
They're like, "Why would we do that?"
I was like, "If everybody's buying,
"you know, if you're not losing 20 to 30% of your customers that
"you approach, I mean at a minimum,
"then you're not charging enough for the product."
And, to me, when we think about price yielding curves and how do
we optimize kind of how we price the product,
20% push back is a good feedback loop.
Again, this is early days before you have a lot of data to really
dive in and create the right packages and target in and
segment the right customers.
So you want to push for 20% push back.
So step number four, which is a bonus,
is the 10-5-20 rule.
Think about it, put all three steps together.
10 times the value, 5% increases until 20% push back.
If you're early days in your startup just think about that
framework when you're talking to your team and just slowly
execute the pricing strategy because,
like I said, most of you guys could benefit from
an increase in price.
It's gonna get you to profitability there faster and
is really gonna keep the team focused on
generating value for your customer.
So quick recap, one, 10X value always.
Two, increase by 5% increments and three,
push until you get 20% of your customers saying
eh-eh, not gonna buy.
As I mentioned at the beginning of this video I want to share an
incredible resource called the Rocket Demo Builder.
You can click the link below
in the description to download that.
It will help you present and communicate your value to a
customer in a fraction of a the time and get them to commit to
buying from you during that demo and if you liked this video,
be sure to click the like button.
Subscribe to my channel and if you know somebody who could
benefit, be sure to share it with them.
Thanks for watching and I'll see you next week.
Duh-duh-duh duh-duh-duh.
- [Jaret] I still don't think you mentioned--
- I did right at the beginning.
- [Jaret] You did? - I did yeah.
- [Jaret] Oh okay.
- [Dan] (claps hands) Done.