Pricing is one of the areas that I see first-time entrepreneurs undersell themselves. What I mean is that there’s a tendency to price a product too low. Paul Graham says, “You’ve found market price when buyers complain but still pay.” It’s not that you’re trying to take advantage of customers but rather attempting to determine the optimum price (which often isn’t the highest). Software-as-a-Service (SaaS) is especially interesting due the rental nature of the relationship. The client isn’t buying the software but rather paying a monthly or annual fee for access to the application.
Here are a few things to keep in mind when pricing a SaaS app:
- Under $10/month is generally a consumer app that is fully self-service
- $20-$100/month is more small business and self-service or limited service to get going
- $100-$500/month is no-man’s land where it is too expensive to be self-service and it is too cheap to compensate consultative inside sales reps (the exception is products that replace existing, known quantities like VoIP services replacing phone services)
- $500-$1,500/month is the sweet spot for having a quality inside sales team that is well compensated
- $1,500+/month enters the territory of an expensive field sales force with significant travel and expense costs
Pricing is one of the more difficult things to do early on and I recommend starting two or three times higher than your initial thinking and always remember that it is easier to lower prices that to raise prices.
What else? What are some other considerations when pricing a SaaS app?
David Cummings on Startups 
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