Choosing a business model while a startup or community is young
The Pricing work group on where to put the charge, who should pay, and how to test a model before scaling it.
Updated
Find the behavior that creates value, put the charge where it does the least damage to it, and test with real buyers before you commit.
- Leave the scarce action free. Dan Hockenmaier asks whether the scarce input is contributors, people finding each other, or work done for members. eBay waived listing fees for sellers' first 250 items a month because charging first held back supply. Kyle Poyar would leave that contribution free and test a paid offer with whoever benefits from it. He points to Expensify, which charged only for people who submitted an expense report that month.
- Tie repeat use to a way to pay. Elena Verna follows one user from first value through return visits to a purchase or a sales call. Free access needs a job: at Miro, free users could collaborate on three boards, which brought in more people. She also checks that users know a paid offer exists. In one case she cites, 70 to 80% of free or trial users did not.
- Watch what happens after the first purchase. Dan reads repeat purchases moving off-platform as a sign the service on later purchases may be worth less than the fee. Ben Williams, drawing on Snyk Advisor, warns that a free resource for a nearby use case can bring lower-intent signups, so he compares those cohorts with users who came for the paid problem.
- Run the math, and keep the model easy to change. Kyle asks how many paying organizations it takes to cover the cost of serving everyone. Alvaro Morales says to put the proposed charge in the product brief before launch, and wants billing cheap to change; at Asana he saw pricing ideas stall on six to twelve months of engineering work.
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Pricing
Frequently Asked Questions
How should a consultant or agency price its services?
By the shape of the work: a fixed fee for a defined deliverable, a retainer for ongoing access, prepaid units for variable requests. Add a performance fee only once the metric, baseline and client duties are agreed.
Should a transaction fee be flat or a percentage?
Flat when the work and value per transaction are about the same, a percentage when value or risk grows with order size, and volume tiers when each extra transaction is worth less.
How do you present a pricing change to executives?
Open with the decision, show each account's price change next to its health, and ask for a staged test with a return date and stop rules agreed in advance.
How many pricing tiers should a SaaS product have?
Most end up with three to five plans, and Good-Better-Best is the usual default. Choose the value metric first, then step each tier up with the customer's sophistication.
How do you break down a competitor's pricing?
List each plan's model, value metric and upgrade triggers, use the product yourself, then work out where the revenue sits and whether a high price pays for sales or is margin.
How should AI features and agents be priced?
Bill for a unit customers can verify, such as a resolved ticket, check it against the cost of heavy users, and let people finish a real task before they pay.
How do you move existing customers to a new pricing model?
Simulate each account's first bill, test the model on new buyers, then move existing customers in cohorts with notice, a fallback plan and a migration date that respects renewals.
How long should a free trial be?
Long enough for retained customers to reach the paid value. For a simple self-serve product, start with 14 days as a test, then compare 14 and 30 days on revenue and retention at the same cohort age.
What makes people pay at a paywall?
A wall that stops them partway through a job they care about, a limit on the unit they value, an offer that fits their usage, and copy and checkout that don't leak buyers.
