How to Price Your SaaS (Without Guessing)

Every SaaS founder agonises over pricing. Too high and nobody signs up. Too low and you can't sustain the business. Most end up picking a number that "feels right" and hoping for the best.

That's not a strategy. Here's how to think about pricing properly.

Pricing is a product decision

Most founders treat pricing as a finance problem - what do we need to charge to cover costs and make a margin? That's backwards.

Pricing determines:

• Who your customers are - a £29/month tool attracts different buyers than a £299/month tool
• What features you build - higher-priced tiers justify more investment in enterprise features
• How you sell - self-serve at low price points, sales-led at high ones
• How fast you grow - lower prices need volume, higher prices need fewer but stickier customers

Get pricing wrong and you'll build the wrong product for the wrong audience with the wrong growth model.

The three-tier framework

Three tiers is the sweet spot for most early-stage SaaS products. Not two, not five. Three.

Starter

The entry point. Low friction, low commitment. This tier exists to get people in the door and using the product. Price it low enough that it's a no-brainer - the kind of purchase that doesn't need manager approval.

Keep the feature set focused. Starter should solve the core problem well but leave room for users to want more.

Growth

This is where the money is. Growth should be the obvious choice for most customers - enough features to be genuinely useful, priced to feel like good value relative to the tiers either side of it.

The psychology here is important. Growth should feel like the "smart" choice. Not the cheapest, not the most expensive. The one that sensible people pick.

Enterprise

Enterprise isn't always a fixed price. For many SaaS products, it's "contact us" - a signal that you're willing to customise for larger organisations. This tier does two things: it anchors the price of Growth (making it look reasonable by comparison) and it opens the door to high-value contracts.

Common mistakes

Pricing too low

The most common mistake. Founders undercharge because they lack confidence, because they're comparing themselves to established competitors, or because they think low prices will drive adoption.

Low prices attract price-sensitive customers who churn fast, demand a lot of support, and never upgrade. You end up working harder for less revenue with worse customers.

Too many tiers

Five tiers with subtle differences between each one. The customer can't figure out which to choose, so they choose nothing. Decision paralysis is real. Keep it simple.

Feature-gating the wrong things

The features you restrict to higher tiers need to be things customers discover they need after they've started using the product. Don't gate core functionality - that just makes the cheap tier feel broken.

Gate things like: team collaboration, advanced analytics, integrations, priority support, custom branding. Things that become important as usage grows.

Not testing

Your first pricing will be wrong. That's fine. But you need a plan to test and iterate. Track conversion rates by tier, monitor upgrade patterns, and talk to customers who chose (and didn't choose) each option.

Free trial vs freemium

This is the other big decision, and there's no universal answer.

Free trial works when your product delivers obvious value quickly. Give people 14 days to experience the product, then ask them to pay. Works well for tools with clear, measurable outcomes.

Freemium works when your product benefits from network effects or when the free tier serves as marketing. Think Slack, Notion, Figma - free users bring in paid users through team adoption.

If neither of those applies to your product, just charge from day one. There's nothing wrong with a simple paid product.

The pricing page

Your pricing page is one of the highest-traffic pages on your site. Treat it like a product page, not a table.

• Make the recommended tier visually prominent
• Use clear feature descriptions, not jargon
• Show annual pricing by default (higher commitment, lower effective cost)
• Include social proof near the pricing - testimonials, customer logos, usage stats

The rule of thumb

If nobody ever complains about your pricing, you're too cheap. If everyone complains, you're too expensive. The sweet spot is where most people pay without friction but a few ask for a discount. That's where you want to be.