What's the Minimum Amount a SaaS Startup Needs to Charge Its Customers?
Yesterday, I was at Indiehackers NYC meetup and one of the founders attending the event was worried about how he should go about pricing his SaaS service.
He said that he didn’t know how much he should charge and was worried that setting the price for his service too high might create roadblock to getting sales. On the other hand if he prices his service too low, he might be undervaluing his services and setting bad expectations.
My initial response was: YES, that's right on both counts.
Setting prices high costs you customers who won’t be willing to pay that amount and setting prices low undervalues the services your business offers.
But these two statements will always be true. High prices will always dissuade some customers and low prices will always undervalue your services and set in a level of price stickiness.
Given these two challenges are inherent to pricing, the question we're left with is: what do you need to make from your SaaS for this business to be worthwhile?
For many SaaS founders the ultimate goal is to completely leave your day job behind. By figuring out what these founders need to make every year to continue pursuing this business we can back into an annual revenue number.
If you charge $5 for your SaaS and even manage to get 1,000 paying customers, you’ll still only be making $5,000 a month.
If getting to $5k MRR takes you 18 months of working full time to get there, the business isn’t sustainable.
So I’ve created a calculator to decide what you need to charge for your SaaS for it to be worth it.