SaaS Pricing Models Explained in 5 Minutes

0:00in this video i'm going to walk through five sas pricing models in five minutes there are more ways to price sas than most people think and i'm going to walk through the top five from the most common to the lesser known i'm rob walling i'm a startup founder with multiple exits the author of three books on building startups and an investor in more than 100 companies every year with microconf which is our online and in-person community of sas founders we do a survey and we call it the state of independent sas and this is to capture data from folks who aren't necessarily on the venture track so it's

0:34bootstrapped mostly bootstrap sas companies you can still raise funding and be part of this but they're independent and they're not on that venture treadmill and one of the questions we ask is about pricing models and so the top five models that i'm going to cover in this video come from that question and because of this survey and report which you can check out at stateofindysass.com we know how often each of these is used at least according to the folks who respond to the survey sas pricing model number one is monthly this is used by almost 47 of sas companies that we've surveyed and i would say that's about right many many

1:13sas companies charge monthly and it is the most common pricing structure pricing model number two is annual and this is where you charge for a full year up front some companies discount maybe they do 12 months for the price of 10 20 off 15 off and other folks only charge annual and in fact according to our state of independence house report almost 36 percent of sas companies charge annually and charging annually can be a great way to get a lot of cash up front from a new customer that allows you to then reinvest in growth pricing model number three is metered pricing only 6.6 of respondents to our survey said that

1:51they use metered pricing it's definitely a less common way to go usually sas companies use tiers and they are then able to capture a bit more value than a true metered approach that you know meters up and down with an individual value metric an individual subscriber count as opposed to having tiers of subscribers for example pricing model number four is pay as you go looks like about 4.5 of sas companies use pay as you go and this was a model the first time i ever saw it was with mailchimp where instead of having a subscription you could buy credits that are more expensive than if you just paid monthly

2:32but this was a way for people to dip their toe in the water when they don't want to pay that recurring amount and now there are many sas companies apparently about four or four point five percent of sas companies who have some option to use pay as you go before i dive in to the fifth sas pricing model if you're enjoying this video i'd love it if you'd hit that like button below and subscribe to the channel we have amazing videos coming out focused on sas being a sas founder growing your sas and they're coming out every week with that let's dive in to the fifth sas

3:04pricing model which is revenue share it looks like about 2.3 of sas companies have a revenue share component you might think of this as like shopify where you have a monthly fee but also they take a cut off the top of everything that you sell and so while this is not a super common way to price sas it is definitely one that i think has become more popular as companies like stripe and shopify and a lot of shopify add-ons take just a small percentage of the dollars that you are pushing through the system it's also called gross merchant value or gmv if you ever hear that term that is the total dollars

3:45being processed through a sas app and then if you take let's say a two percent revenue share on the gmv then that would be your sas revenue in addition to any monthly recurring charges thanks so much for joining me as we walk through these five sas pricing models explained i hope you enjoyed the video and i'll see in the next one

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