Founders will spend six months on a feature and six minutes on the price. Yet pricing determines which customers you attract, what they expect, and how much runway each new signup buys you.
Pick the thing you charge for, first
Before choosing a model, identify your value metric — the unit that grows as the customer gets more value from you. Seats, contacts, transactions, storage, projects, messages. Everything else follows from getting this right.
A good value metric has three properties: customers understand it immediately, it grows as their success grows, and it is expensive for them to game.
The main models and who they suit
- Per seat — simple to explain and forecast, but it penalises adoption and quietly encourages password sharing. Best when value genuinely scales with headcount.
- Usage based — aligns cost with value beautifully, but makes revenue unpredictable for you and bills unpredictable for them. Best for infrastructure-shaped products.
- Tiered — packages features into a few named plans. Easy to buy, but every tier boundary is an argument waiting to happen.
- Flat rate — radically simple, radically hard to scale revenue with. Works for narrow, single-purpose tools.
- Hybrid — a platform fee plus usage. Most mature products drift here eventually, because it stabilises revenue while staying aligned.
Free tiers cut both ways
A free tier can be your best acquisition channel or your largest cost centre, and which one it becomes depends entirely on where you draw the line. The limit should sit exactly where a user has felt real value but is about to need more — not before, and definitely not long after.
The mistakes that are expensive to undo
- 1Pricing from your costs rather than from customer value — it caps your ceiling permanently.
- 2Launching too cheap, then discovering that raising prices on an installed base is a political event.
- 3Building tiers around features you find interesting rather than features that separate customer segments.
- 4Offering unlimited anything before you understand your own unit economics.
- 5Never revisiting price, so that inflation and added value quietly erode your margin year after year.
“Under-pricing is not humility. It filters for the customers least able to pay and least likely to stay.”
— Pawan Dhillon
How to actually decide
Talk to ten customers about what the problem costs them today — in money, hours, or risk. Price against that number, not against your competitors, and certainly not against your own discomfort. Then plan to revisit it every year, deliberately.
Publish your pricing. Hiding it behind contact sales filters out exactly the self-serve customers who would have been cheapest to acquire.
