{"id":18628,"date":"2025-07-11T09:00:00","date_gmt":"2025-07-11T13:00:00","guid":{"rendered":"https:\/\/www.sage.com\/en-us\/blog\/?p=18628"},"modified":"2026-01-21T11:03:52","modified_gmt":"2026-01-21T16:03:52","slug":"8-saas-billing-models-to-adopt-and-scale-your-saas-company","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-us\/blog\/8-saas-billing-models-to-adopt-and-scale-your-saas-company\/","title":{"rendered":"8 SaaS pricing models to adopt and scale your SaaS company"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-us\/blog\/category\/technology-innovation\/\" class=\"entry-header__link\">Technology &amp; Innovation<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\t8 SaaS pricing models to adopt and scale your SaaS company\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2025-07-11T09:00:00-04:00\">July 11, 2025<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"8 SaaS pricing models to adopt and scale your SaaS company\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-us\/blog\/8-saas-billing-models-to-adopt-and-scale-your-saas-company\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n<\/header>\n\n\n\n<div class=\"wp-block-post-author has-dark-background-color alignfull\">\n\t<div class=\"container\">\n\t\t<div class=\"col\">\n\t\t\t\t\t\t\t<div class=\"co-authors\">\n\t\t\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-us\/blog\/author\/joechurchwoods\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/05\/Joe-Yard-2-crop-350x350.jpg\" class=\"entry-author__image\" alt=\"Joe Church Woods\" \/>\t\t\t\t<span class=\"entry-author__name\">Joe Church Woods<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n\n\n<p>If you\u2019re a SaaS founder, product manager, or CFO, choosing the right pricing model for your SaaS product is one of your most important decisions.<\/p>\n\n\n\n<p>The right approach drives product-market fit, helps differentiate your offering, and creates predictable revenue streams to fuel long-term growth.<\/p>\n\n\n\n<p>When thoughtfully selected and paired with accurate forecasting and tools, SaaS pricing models can accelerate growth more than nearly any other lever.<\/p>\n\n\n\n<p>But the wrong choice\u2014or using outdated or rigid subscription billing systems\u2014can slow you down and create unnecessary friction.<\/p>\n\n\n\n<p>This article walks through 8 effective SaaS revenue models to help you confidently scale.<\/p>\n\n\n\n<p>Along the way, you\u2019ll dive into what makes SaaS pricing unique and why it plays a central role in building a successful software business.<\/p>\n\n\n\n<p><strong>Here\u2019s what we\u2019ll cover:<\/strong><\/p>\n\n\n<?xml encoding=\"utf-8\" ?><div class=\"wp-block-yoast-seo-table-of-contents yoast-table-of-contents\"><ul><li><a href=\"#h-what-is-a-saas-pricing-model\" data-level=\"2\">What is a SaaS pricing model?<\/a><\/li><li><a href=\"#h-why-saas-pricing-models-are-unique-and-important-for-scaling-your-business\" data-level=\"2\">Why SaaS pricing models are unique and important for scaling your business<\/a><\/li><li><a href=\"#h-8-saas-pricing-models-to-scale-your-saas-business\" data-level=\"2\">8 SaaS pricing models to scale your SaaS business<\/a><\/li><li><a href=\"#h-building-and-forecasting-a-subscription-billing-business\" data-level=\"2\">Building and forecasting a subscription billing business<\/a><\/li><\/ul><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-a-saas-pricing-model\">What is a SaaS pricing model?<\/h2>\n\n\n\n<p>A SaaS pricing model is the framework a software company uses to charge customers for access to its product or service.<\/p>\n\n\n\n<p>It determines how value is packaged and monetized\u2014whether through a fixed monthly fee, per-user charges, usage-based billing, or a combination of these.<\/p>\n\n\n\n<p>These models can range from straightforward flat-rate pricing to more flexible and scalable options like usage-based or hybrid SaaS revenue models.<\/p>\n\n\n\n<p>The goal is to align pricing with customer needs while supporting sustainable growth for your business.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-why-saas-pricing-models-are-unique-and-important-for-scaling-your-business\">Why SaaS pricing models are unique and important for scaling your business<\/h2>\n\n\n\n<p>Understanding what sets SaaS billing apart enables your team to maximize recurring revenue, boost retention, and scale more predictably.<\/p>\n\n\n\n<p>The importance of choosing the right pricing model in SaaS cannot be overstated.<\/p>\n\n\n\n<p>It provides a stable revenue stream, supports long-term planning, and allows you to focus on customer value instead of chasing one-time deals.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-how-saas-billing-models-are-different-than-other-models\">How SaaS billing models are different than other models<\/h3>\n\n\n\n<p>The Today\u2019s SaaS pricing strategies have come a long way from the early days of flat-fee models.<\/p>\n\n\n\n<p>As the market has matured, so have the expectations of your customers\u2014and the need for more flexible, scalable, and data-driven SaaS revenue models.<\/p>\n\n\n\n<p>So, what sets SaaS billing models apart from traditional pricing?<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Recurring revenue: <\/strong>most SaaS subscription pricing models rely on ongoing monthly or annual payments. This recurring structure makes it easier to forecast revenue, plan for growth, and build long-term customer relationships.<\/li>\n\n\n\n<li><strong>Data-driven decision-making: <\/strong>you can closely monitor key metrics like Monthly Recurring Revenue (MRR), churn rate, Customer Acquisition Cost (CAC), and Customer Lifetime Value (CLTV). These KPIs help guide pricing strategies, product development, and marketing efforts.<\/li>\n\n\n\n<li><strong>ASC 606 compliance:<\/strong> unlike traditional one-time sales, SaaS revenue must be recognized over time based on when the service is delivered. This requires alignment with ASC 606 standards and the use of specialized accounting tools to ensure accurate reporting.<\/li>\n<\/ul>\n\n\n\n<p>Understanding these differences is essential when choosing or refining your SaaS pricing model\u2014and making sure it supports your company\u2019s growth and profitability goals.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How to develop SaaS pricing models<\/h2>\n\n\n\n<p>When developing a SaaS pricing model, consider the following key steps:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Analyze your costs: <\/strong>make sure your pricing covers your expenses while delivering a healthy margin.<\/li>\n\n\n\n<li><strong>Assess the value you offer: <\/strong>determine the true value your product provides to customers and price accordingly.<\/li>\n\n\n\n<li><strong>Research the market: <\/strong>study competitors and industry trends to position your pricing strategically.<\/li>\n\n\n\n<li><strong>Choose the right pricing structure: <\/strong>select the model that best aligns with your business goals.<\/li>\n\n\n\n<li><strong>Refine as you grow: <\/strong>continuously adjust your pricing based on customer feedback and market shifts.<\/li>\n\n\n\n<li><strong>Be transparent and communicative: <\/strong>clearly explain your pricing structure and any changes to build trust with your customers.<\/li>\n<\/ul>\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">The Definitive SaaS Buyer\u2019s Guide to Planning Software<\/h2>\n\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-5cf8c4bd-86d1-40d3-a7b4-712a65585d3b\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Download now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1215\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/09\/GettyImages-1483132604-1215x810.jpg\" class=\"single-cta__image\" alt=\"Woman using accounts payable KPIs to improve efficiency and reduce costs\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/09\/GettyImages-1483132604-1215x810.jpg 1215w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-8-saas-pricing-models-to-scale-your-saas-business\">8 SaaS pricing models to scale your SaaS business<\/h2>\n\n\n\n<p>The SaaS model has completely transformed how businesses and consumers access software\u2014offering continuous updates, built-in scalability, and lower upfront costs.<\/p>\n\n\n\n<p>But as a SaaS founder, product manager, or CFO, your long-term success depends on choosing a SaaS pricing model that supports sustainable growth, maximizes customer value, and aligns with your product strategy.<\/p>\n\n\n\n<p>Below are eight effective SaaS revenue models, along with real-world SaaS pricing models examples, plus key advantages and potential drawbacks to help identify the right approach for both the product and target market.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-1-usage-based-drawdown-or-pay-as-you-go\"><strong>1: Usage-based (drawdown) or pay as you go<\/strong><\/h3>\n\n\n\n<p><a href=\"https:\/\/www.sage.com\/en-us\/blog\/building-and-forecasting-a-usage-billing-business\/\" target=\"_blank\" rel=\"noreferrer noopener\">A usage-based model<\/a> charges customers based on how much they use the service during a billing period.<\/p>\n\n\n\n<p>It\u2019s ideal for companies that offer variable-use tools such as APIs, data processing, or bandwidth.<\/p>\n\n\n\n<p>Examples of companies that use this type of model include <a href=\"https:\/\/www.maxio.com\/blog\/events-based-billing-aws-twillio\" target=\"_blank\" rel=\"noreferrer noopener\">Amazon and Twilio<\/a>.<\/p>\n\n\n\n<p><strong>Pros:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Transparent pricing that\u2019s easy for customers to understand.<\/li>\n\n\n\n<li>Naturally reduces churn, since users only pay for what they use.<\/li>\n<\/ul>\n\n\n\n<p><strong>Cons:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Revenue can be unpredictable and harder to forecast.<\/li>\n\n\n\n<li>Performance depends heavily on customer usage patterns.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2-per-user-per-active-user\"><strong>2: Per-user<\/strong> \/ per active user <\/h3>\n\n\n\n<p>The per user (or per active user) pricing model charges customers based on the number of individual users\u2014or \u201cseats\u201d\u2014who have access to the software.<\/p>\n\n\n\n<p>It\u2019s one of the most widely adopted SaaS subscription pricing models, especially among collaborative tools and B2B platforms. <\/p>\n\n\n\n<p>This model is commonly used by companies like <a href=\"https:\/\/www.forbes.com\/advisor\/business\/software\/asana-vs-trello\/\" target=\"_blank\" rel=\"noreferrer noopener\">Trello, Asana, and HubSpot<\/a>.&nbsp;<\/p>\n\n\n\n<p><strong>Pros:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Easy to scale as customer teams grow.<\/li>\n\n\n\n<li>Encourages bulk seat purchases.<\/li>\n<\/ul>\n\n\n\n<p><strong>Cons:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Not ideal for single-user or low-collaboration tools.<\/li>\n\n\n\n<li>Team churn can significantly impact revenue.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-3-tiered-pricing\"><strong>3: Tiered<\/strong> pricing<\/h3>\n\n\n\n<p>Tiered pricing offers different sets of features or service levels at ascending price points, allowing you to serve a broader range of customer needs. <\/p>\n\n\n\n<p>This is one of the most widely used and flexible SaaS pricing models, with companies like <a href=\"https:\/\/flippa.com\/blog\/top-saas-companies\/\" target=\"_blank\" rel=\"noreferrer noopener\">Dropbox, Salesforce, and Shopify<\/a> successfully adopting it.&nbsp;&nbsp;<\/p>\n\n\n\n<p><strong>Pros:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Appeals to a wide range of customer types.<\/li>\n\n\n\n<li>Encourages upgrades as your users grow.<\/li>\n<\/ul>\n\n\n\n<p><strong>Cons:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>May deter price-sensitive prospects.<\/li>\n\n\n\n<li>Poorly structured tiers can confuse buyers.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-4-flat-rate-or-subscription-based\"><strong>4: Flat-rate<\/strong> or subscription-based<\/h3>\n\n\n\n<p>With flat-rate pricing, your customers pay a fixed monthly or annual fee for full access to your product\u2014regardless of usage or team size. <\/p>\n\n\n\n<p>This straightforward model is used by popular platforms like <a href=\"https:\/\/www.dashly.io\/blog\/marketing-tech-stack\/\" target=\"_blank\" rel=\"noreferrer noopener\">Grammarly, Hootsuite, and Zoom<\/a>.&nbsp;<\/p>\n\n\n\n<p><strong>Pros:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Simple and easy for customers to understand.<\/li>\n\n\n\n<li>Streamline billing and forecasting.<\/li>\n<\/ul>\n\n\n\n<p><strong>Cons:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Lack of flexibility for different user needs.<\/li>\n\n\n\n<li>Limits opportunities for upsells or expansion of revenue.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-5-feature-based-or-per-feature\"><strong>5: Feature-based or per feature<\/strong><\/h3>\n\n\n\n<p>The feature-based pricing model charges customers based on the specific features or functionality they need.<\/p>\n\n\n\n<p>These features are typically bundled and tailored to different segments\u2014such as freelancers, small businesses, or enterprise clients.<\/p>\n\n\n\n<p>This approach allows pricing to closely reflect the value delivered to each user group.<\/p>\n\n\n\n<p><strong>Pros:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Enables precise targeting based on user personas.<\/li>\n\n\n\n<li>Makes it easier to align marketing and product positioning.<\/li>\n<\/ul>\n\n\n\n<p><strong>Cons:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Can overwhelm prospects with too many options.<\/li>\n\n\n\n<li>Requires deep insights into your customer base.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">6. Bundling or roll your own<\/h3>\n\n\n\n<p>The bundling or roll-your-own pricing model allows customers to mix and match features to create a personalized service package.<\/p>\n\n\n\n<p>Rather than forcing users into pre-set tiers, this model gives them flexibility to pay only for what they need.<\/p>\n\n\n\n<p>It\u2019s especially effective for SaaS companies with a broad range of tools or feature sets, such as Google Workspace, Salesforce, or Microsoft Office 365.<\/p>\n\n\n\n<p><strong>Pros:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Empower users to tailor their own solutions.<\/li>\n\n\n\n<li>Increases potential for high-value purchases.<\/li>\n<\/ul>\n\n\n\n<p><strong>Cons:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>This makes revenue forecasting more challenging.<\/li>\n\n\n\n<li>Some customers may opt for only basic features, reducing potential revenue.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-7-freemium-or-ad-supported\"><strong>7: Freemium or ad-supported<\/strong><\/h3>\n\n\n\n<p>The freemium model gives users limited access to your product for free, with the option to upgrade to premium features.<\/p>\n\n\n\n<p>Alternatively, an ad-supported version can generate revenue while encouraging users to convert.<\/p>\n\n\n\n<p>This approach is used by platforms like <a href=\"https:\/\/help.dropbox.com\/storage-space\/can-i-buy-more-space\" target=\"_blank\" rel=\"noreferrer noopener\">Dropbox<\/a> and Spotify.<\/p>\n\n\n\n<p><strong>Pros:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Low barriers to entry encourage adoption.<\/li>\n\n\n\n<li>Build goodwill while collecting user insights.<\/li>\n<\/ul>\n\n\n\n<p><strong>Cons:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Monetization is often delayed.<\/li>\n\n\n\n<li>Higher likelihood of churn among non-paying users.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">8. Performance-based<\/h3>\n\n\n\n<p>Performance-based pricing ties your revenue to the results your software delivers\u2014such as increased revenue, improved efficiency, or cost savings.<\/p>\n\n\n\n<p>This model works well if you can clearly demonstrate ROI for your customers.<\/p>\n\n\n\n<p><strong>Pros:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Align your pricing with customer outcomes.<\/li>\n\n\n\n<li>Can justify premium pricing if value is proven.<\/li>\n<\/ul>\n\n\n\n<p><strong>Cons:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Difficult to implement and track accurately.<\/li>\n\n\n\n<li>Requires robust attribution and analytics systems.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-hybrid-saas-pricing-models\"><strong>Hybrid<\/strong> SaaS pricing models<\/h3>\n\n\n\n<p>Many SaaS businesses combine multiple pricing strategies to better serve diverse user needs.<\/p>\n\n\n\n<p>For example, tiered pricing might be paired with usage-based add-ons, or per-user pricing might be bundled with feature-based options. <\/p>\n\n\n\n<p>Hybrid SaaS pricing models offer more flexibility, allow for personalized experiences, and can help you increase Average Revenue Per User (ARPU) while improving retention over time.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-building-and-forecasting-a-subscription-billing-business\">Building and forecasting a subscription billing business<\/h2>\n\n\n\n<p>After exploring several effective pricing models for SaaS, the next step is understanding how to confidently build and forecast a subscription-based business.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.sage.com\/en-us\/blog\/how-automation-accounting-can-streamline-saas-billing-processes\/\" target=\"_blank\" rel=\"noreferrer noopener\">Automation plays a critical role<\/a> in scaling operations, enhancing billing performance, and minimizing variability in financial forecasts.<\/p>\n\n\n\n<p>Below are key strategies to help optimize your SaaS billing process and improve the accuracy of your revenue forecasting.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-capture-and-increase-cmrr\"><strong>Capture and increase CMRR<\/strong><\/h3>\n\n\n\n<p><a href=\"https:\/\/www.sage.com\/en-us\/blog\/glossary\/what-is-committed-monthly-recurring-revenue-cmrr-in-saas\/\" target=\"_blank\" rel=\"noreferrer noopener\">Contracted Monthly Recurring Revenue (CMRR)<\/a> is one of the most critical metrics for any SaaS finance leader.<\/p>\n\n\n\n<p>To scale predictably, it\u2019s essential to capture CMRR accurately and implement strategies that drive consistent growth.<\/p>\n\n\n\n<p>Start by ensuring your revenue recognition process aligns with ASC 606 standards.<\/p>\n\n\n\n<p>This means matching billing events with contractual obligations to prevent revenue leakage and maintain compliance.<\/p>\n\n\n\n<p>To grow CMRR, focus on upselling, optimizing pricing structures, and expanding existing customer accounts.<\/p>\n\n\n\n<p>Even small adjustments\u2014like adding new pricing tiers or bundling high-value features\u2014can make a measurable difference.<\/p>\n\n\n\n<p>Flexible pricing models, such as tiered or usage-based billing, can further increase CMRR by improving customer retention and maximizing lifetime value.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-how-to-build-the-dataset-to-reduce-forecast-variability\"><strong>How to build the dataset to reduce forecast variability<\/strong><\/h3>\n\n\n\n<p>Reliable forecasting starts with the right data.<\/p>\n\n\n\n<p>To improve accuracy and make informed decisions, track the following key metrics:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Monthly Recurring Revenue (MRR):<\/strong> your core source of predictable income.<\/li>\n\n\n\n<li><strong>Churn rate: <\/strong>indicates how well you\u2019re retaining customers.<\/li>\n\n\n\n<li><strong>Customer Acquisition Cost (CAC):<\/strong> measures how efficiently you bring in new users.<\/li>\n\n\n\n<li><strong>Customer Lifetime Value (CLTV):<\/strong> helps project long-term revenue from each customer.<\/li>\n<\/ul>\n\n\n\n<p>Building strong forecasts based on these KPIs can help fine-tune your SaaS pricing strategy, minimize revenue surprises, and support better financial planning as your business grows.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Choosing the right pricing model for your SaaS business<\/h2>\n\n\n\n<p>Choosing the right SaaS pricing model is essential to align your product with your business strategy.<\/p>\n\n\n\n<p>Consider the following factors when making your decision:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Your product\u2019s value proposition:<\/strong> evaluate the unique value your product provides to customers, focusing on key features.<\/li>\n\n\n\n<li><strong>Customer buying behavior: <\/strong>understand how your target customers make purchasing decisions.<\/li>\n\n\n\n<li><strong>Competitor pricing: <\/strong>analyze competitors\u2019 pricing strategies to position your product effectively in the market.<\/li>\n\n\n\n<li><strong>Brand positioning and market presence: <\/strong>make sure your pricing aligns with your brand\u2019s identity and market positioning.<\/li>\n\n\n\n<li><strong>Revenue goals and growth stage: <\/strong>select a pricing model that supports both immediate revenue and long-term growth.<\/li>\n\n\n\n<li><strong>Test various pricing models:<\/strong> experiment with different models to identify the best fit for your customer base and business needs.<\/li>\n\n\n\n<li><strong>Operational complexity: <\/strong>consider whether your team can manage the complexity of the chosen pricing model.<\/li>\n\n\n\n<li><strong>Plan for growth:<\/strong> choose a model that can scale with your business as it expands.<\/li>\n<\/ul>\n\n\n\n<p>Be ready to test, gather feedback, and adjust your pricing strategy as your business and market conditions evolve.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">SaaS pricing strategies to know<\/h2>\n\n\n\n<p>Understanding different SaaS pricing strategies is essential for choosing the right model for your business.<\/p>\n\n\n\n<p>Here are seven key strategies you should be aware of:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Penetration pricing: <\/strong>this strategy involves setting a low initial price to attract customers quickly and gain market share. Once you\u2019ve established a customer base, you can gradually raise prices.<\/li>\n\n\n\n<li><strong>Captive product pricing:<\/strong> this model involves offering your main product at a low price but charging higher prices for complementary or essential products (e.g., accessories, add-ons) that customers need to use the main product fully.<\/li>\n\n\n\n<li><strong>Skimming pricing:<\/strong> with this strategy, you set a high initial price to maximize profits from early adopters, then gradually reduce the cost over time as demand decreases.<\/li>\n\n\n\n<li><strong>Prestige pricing:<\/strong> this pricing strategy focuses on setting a higher price to create a premium quality or exclusivity perception. It works well for high-end products or brands looking to position themselves as market leaders.<\/li>\n\n\n\n<li><strong>Free trial pricing: <\/strong>offering a free trial allows customers to experience your product before committing to a paid subscription. This can help increase conversions by letting users see the value before purchasing.<\/li>\n\n\n\n<li><strong>Cost-plus pricing:<\/strong> this straightforward model involves calculating the service&#8217;s cost and adding a markup to determine the price. It\u2019s a simple and effective approach but may not fully account for the product&#8217;s perceived value.<\/li>\n\n\n\n<li><strong>Value-based pricing: <\/strong>with this strategy, you set prices based on the perceived value your product delivers to customers, rather than your costs. This model aligns your pricing with customer needs and the outcomes they expect to achieve.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">SaaS pricing best practices for businesses<\/h2>\n\n\n\n<p>To get the most out of your SaaS pricing models, keep the following best practices in mind:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Keep your pricing page clear, simple, and easy to understand.<\/li>\n\n\n\n<li>Use value-based pricing models whenever possible.<\/li>\n\n\n\n<li>Regularly review customer usage patterns and feedback to identify optimization opportunities.<\/li>\n\n\n\n<li>Align pricing with customer success metrics to support long-term retention and growth.<\/li>\n<\/ul>\n\n\n\n<p>Don\u2019t undervalue your product\u2014set prices that reflect the value you deliver and support sustainable growth.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Final thoughts<\/h2>\n\n\n\n<p>No matter which SaaS pricing model you choose, understanding the differences and their advantages and disadvantages will help you scale confidently.<\/p>\n\n\n\n<p>Take control of your SaaS revenue models, streamline complex billing processes, and unlock real-time insights that fuel long-term, intelligent growth.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Stay ahead of the competition and achieve long-term success with Sage<\/h2>\n\n\n\n<p>Ready to scale smarter?<\/p>\n\n\n\n<p>From automated forecasting to ASC 606 compliance, Sage solutions offer a robust financial management platform built specifically for SaaS and tech companies.<\/p>\n\n\n\n<p>Explore our <a href=\"https:\/\/www.sage.com\/en-us\/industry\/subscription-saas\/\" target=\"_blank\" rel=\"noreferrer noopener\">AI-powered subscription management software for SaaS<\/a>\u2014built to support your SaaS or tech business from startup to IPO and beyond.<\/p>\n\n\n\n<p><em><strong>Editor\u2019s note:<\/strong>&nbsp;this article was originally published in May 2023 and has been updated and rewritten for relevance.<\/em><\/p>\n\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Sage Ahead: Finance\u2019s secret weapon for subscription and SaaS start-ups<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p class=\"\">Discover how Sage Ahead can take you from seed to IPO and beyond.\u00a0<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"https:\/\/www.sage.com\/en-us\/sage-business-cloud\/intacct\/industry\/subscription-saas\/early-stage\/\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\tid=\"cta-id-22097\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tdata-button-location=\"cta_box\"\n\t\t\t\t\t\t\t\t\t\t\t>Learn more<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1358\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/09\/GettyImages-1430300481-1358x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/09\/GettyImages-1430300481-1358x810.jpg 1358w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to our Sage Advice Newsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Get our latest business advice delivered directly to your inbox.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-ab515c6e-7e90-4c2f-a67e-113872516e8b\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1073797282-1440x810.jpg\" class=\"single-cta__image\" alt=\"Working from home with tea in hand\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1073797282-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Are you looking to optimize pricing for your SaaS product? Explore 8 proven SaaS pricing models designed to help you scale and maximize recurring revenue.<\/p>\n","protected":false},"author":1847,"featured_media":18631,"menu_order":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"footnotes":""},"categories":[46,48],"tags":[195,170,420,128,153,155],"business_type":[41],"lilypad":[],"context":[],"industry":[450],"persona":[100,98,96,97],"imagine_tag":[461,468,444,434,233,471],"coauthors":[592],"class_list":["post-18628","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-growth-customers","category-technology-innovation","tag-boss-your-business","tag-business-strategy","tag-cloud-financial-management","tag-customer-acquisition","tag-growing-a-business","tag-staying-competitive","business_type-growing-business","industry-software-saas"],"sage_meta":{"region":"en-us","author_name":"Joe Church Woods","featured_image":"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/04\/GettyImages-1261563841.jpg","imagine_tags":{"461":"Cloud","468":"Grow your business","444":"Intacct Medium Business","434":"Large Business","233":"Medium Businesses","471":"SaaS"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice US","distributor_original_site_url":"https:\/\/www.sage.com\/en-us\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts\/18628","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/users\/1847"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/comments?post=18628"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts\/18628\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/media\/18631"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/media?parent=18628"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/categories?post=18628"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/tags?post=18628"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/business_type?post=18628"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/lilypad?post=18628"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/context?post=18628"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/industry?post=18628"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/persona?post=18628"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/imagine_tag?post=18628"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/coauthors?post=18628"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}