- If you're building a SaaS business,
one of the decisions you have to make really early on,
that could have lasting impact
on your likelihood of getting to product-market fit,
is how you price your product.
There's a big question.
Do you do freemium?
Do you charge on a per-seat basis?
Is there a team plan?
How does it all work?
In this video,
I'm gonna walk you through the four principles
I would follow, if I were to start a SaaS business today,
how I would price my product, intro.
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What's up everybody, welcome to Unstoppable,
I'm TK, and on this channel,
I help startup founders like you, navigate the path
to product-market fit.
Navigate the path to the next stage of growth,
for your SaaS business.
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to grow your SaaS business.
And also if you're back, welcome back again,
really excited to have you here.
Now, if you're building out a SaaS business,
one of the big questions that you really need to dig into,
is how do you actually bake in your pricing model?
How do you actually define your first steps of the product?
How do you navigate to that product-market fit?
This' one of the things I tackle in my SaaS school,
so if you're a founder navigating this right now,
you don't wanna go at it alone,
be sure to check out my SaaS school,
which is now open for enrollment.
I'll tell you more about it at the end of this video.
In this video, let's dig in a little bit more,
into pricing and how you go about your pricing strategy,
especially in the early days.
If you're excited dig in,
smash that like button for the YouTube algorithm,
and let's look at number one.
The first principle, I would look at is,
what's the department,
you're selling your B2B SaaS software into?
And if you're selling into consumer,
that's really tough.
I don't know how to tell you it's probably
nine bucks a month, boom!
End of video.
But if you're B2B SaaS,
it's a little bit more nuanced, so let's keep going.
Also, if you're doing consumer,
this will be valuable for you, so I would keep watching,
but more importantly, what?
How big is the department that you're selling into?
If it's lots of people in that department,
then you probably wanna do a per user, per month
type of model.
If they're not a lot of people,
if they're not a lot of users,
if it's a smaller department,
then you probably wanna price it by result.
What do I mean by that?
Let me give you an example.
ToutApp, my company that I started,
was selling the sales teams.
And sales teams generally
have a lot of salespeople, right?
They have a lot of salespeople,
so we went on a per user, per month model.
Now, Marketo on the other hand,
Marketo bought ToutApp, I worked at Marketo,
incredibly smart people that originally started Marketo,
they realized that marketing departments were small.
So, on a per-seat basis,
they just wouldn't make a lot of money.
So they essentially priced per result.
What do I mean by per result?
Marketo price based on the number of contacts,
in your database.
It was also the case where Marketo,
the reason marketing teams bought Marketo,
was to actually generate more leads.
So the more successful they were with Marketo,
the more leads they would generate,
the more contacts they would have in their database,
and the more they would pay for Marketo, happily.
And that's the power of this.
So if you're targeting a small department,
go after a dollar per result basis,
and if you've got lots of users,
then go on a dollar per user, per month basis.
There is a nuance to this.
One of the things we did at ToutApp,
was we eventually started to incorporate,
a minimum platform fee.
We said, you know what,
even if we have five salespeople,
there's a minimum fee of 15K per year.
Otherwise it's just not worth it for us to do the deal,
I can't even pay for the salesperson
and the marketing and the services,
so you can always incorporate a minimum fee
as you start to go up market.
The one more thing you really wanna think about
as you're pricing this and as you building your product,
initial product, is you wanna optimize
for a single player mode.
What do I mean by that?
And there's always exceptions to this,
but they're really extremes.
You always wanna have your software
be something where there's a single player mode.
Meaning, I can go sign up for it, and get value from it,
without having to invite another person into the program.
Without me having to go and convince someone else,
to also download the software and use it.
What that means is you need to get the user
to some sort of aha moment,
on a single player basis.
You can just play the game,
play the software in your own way,
and get value, get aha,
so you start paying that per user fee.
Once you have that, that's principle number one.
Once you have that,
then, you can start to build out,
this is principle number two,
you can start to build out an upsell
to multiplayer mode with team features.
What that means is, you can say, you know what?
You're paying us X dollars per month,
and you're getting value,
and if you actually invite a team member,
if you actually invite another person,
then they'll get value too,
but not only will they also get value together,
the entire enterprise will get even more value.
And that's the power to this.
You can say, oh,
if you bringing a team member, and three other people
or whatever it may be,
you will get even more value from the platform,
and as they do that,
they get more value and you also make more money,
because your pricing model is structured that way.
So I always say, you gotta have a single player mode,
and then you can upsell down the line to a multiplayer mode.
Now the easy way to do this is to add analytics,
or some sort of team dynamics
or some sort of collaboration or workflow,
those things are fairly standard patterns,
in B2B SaaS software,
but what's often forgotten, is that single player mode.
If you don't have the single player mode,
you will really have a tough time growing, initially
and getting to that product-market fit,
because people will be stuck, right on step one
because they have to convince someone else
and they're bad at convincing people.
People are generally bad at convincing people.
Now before I go to the principle number three,
let me just pause here for a second.
Are you starting to see the difference in approach to this?
And are you starting to see why this is just so important
to nail early on?
'Cause if you don't,
it will actually cause you to go down rabbit holes,
under the wrong rabbit holes,
especially as you're navigating a product-market fit.
If you starting to see that,
can I just get a yes!
In the comments below, so that I know you're with me.
Also, by the way, if you wanna dig deeper into this,
and to really crafting the strategy for your SaaS business,
I created a 10 point SaaS checklist.
It's how to actually create a SaaS business
without losing months and building the wrong product,
you can check it out below,
I'll include the link,
I'll tell you more about it at the end of this video,
but let's go into principle number three.
And by the way, if you haven't smashed that like button yet,
please do so and let's dig into principle number three.
Principle number three is,
it kinda goes into the age old question of like,
what do you charge?
Like what's the price?
I gave you some of the mechanics here,
but more importantly, the question of like,
do I do freemium or do I charge?
Especially early on to get my first hundred users,
a thousand users.
I think that there're a lot of startups
that argued for let's do freemium,
because Facebook did freemium.
But then they realized business software,
is totally different.
B2B SaaS software is just a different beast.
I actually believe that you should not do a freemium.
You should not do a freemium,
what you should start with is $30 a month.
Why is it $30 a month?
Because, the math just works out well,
at $30 a month you can actually cover Facebook ads,
there's enough of like a transaction here,
where you can actually cover Facebook ads
or where are you spending money to actually acquire a lead,
and then you can actually charge them,
you can start to make back that money
and now stuff just works at that $30 a month level.
On top of that,
it forces a floor, essentially.
You kind of have to say to yourself and you founding team
and the engineers and the product managers,
whoever's involved with you that look,
we need to be able to deliver $30 a month worth of value.
We need to be able to communicate $30 a month
worth of value.
We need to be able to show how they'll make that $30
back in their business,
by paying us $30 per month, per user.
And that actually helps you set a bar,
sets a bar of like,
no, this is gonna be an important enough problem to solve
that they're willing to spend $30 a month if not more,
to actually buy our product.
It sets that floor, of like this is the minimum impact
that we wanna have.
What this allows you to do also,
is navigate the path to product-market fit more.
A lot of times SaaS companies,
give away their software for free.
And people are like, yeah, I like it and they use it.
But they never convert to revenue.
And they never get that real revenue traction,
and therefore they're just,
not ever gonna become a real business.
If you set a bar for $30 a month,
we did this at ToutApp,
we were $30 a month right from the beginning,
it forced us to set that bar,
it forced us to actually figure out
how to communicate our products
and people paid us money.
And then after that, once you have that,
once you know, what converts to revenue,
then you can add freemium on top of that
to accelerate that growth if you want to.
We never did freemium.
What we ended up doing was a free trial.
We did a two to three week trial,
and then we converted to revenue
and that was fine for us as well,
we never did freemium,
but you could try freemium if you really want to.
There are lots of companies out there,
that figured out their revenue model
and their product-market fit first, by actually charging.
Because once people pay,
then you know there's something real there,
if they're just using it for free,
you don't know if it's for real,
and then added a freemium model to grow faster.
ConvertKit is one of my favorite SaaS platforms,
they just did this recently.
Notion almost started with free,
but I think took it away or something
but just doubled down on free again,
now that they have a product-market fit figured out,
so you can add that later on.
But what I always say,
third principle is $30 a month, bare minimum.
So to recap pricing principles,
if your department size is small,
then go for by result,
if it's lots of people, then go for per user, per month.
You always wanna optimize for single player mode,
then you wanna upsell for a multiplayer mode
with team features that gets them even more value,
and lastly start at minimum $30 a month if not more,
forces you to actually test
whether this is valuable enough for them to pay,
it also makes sure your team has a bar to hit on
at least delivering $30 a month of value,
and last, so you can add freemium later.
Those are my principles.
If I were to start a brand new SaaS business today,
these are the principles I would follow
for a B2B SaaS business,
and how I would go about pricing it,
which also kind of rolls into how I would structure
the product, to get to product-market fit as well.
Now you know how to actually follow these principles but,
if you're in the stage where you're building out
a SaaS business, you wanna get the strategy right,
you wanna make sure that you're asking the right questions
so you don't waste time building the wrong product,
be sure to check out my 10 point SaaS checklist.
You can check it out with following the link below
or you just go to TKKADER.COM/SAAS-CHECKLIST.
And in there, I'll walk you through the very pointed
questions that I've developed to actually help you
stress test your SaaS idea,
and create a plan of action to actually drive to,
product-market fit.
If you got value from this video,
please smash that like button,
it means the world, to my team and me,
we put a lot of effort in these videos,
if you've got a fellow founder,
that will get value from this video,
please share with them as well.
I drop a video every single Sunday, Wednesday and Friday,
so be sure to hit that subscribe button
and that bell icon so that you get notified,
every single time I drop an episode,
and lastly, remember,
everyone needs a strategy for their life and their business,
but when you are with us,
yours is gonna be unstoppable.
I'm TK, I'll see you in the next episode.
(upbeat music)