Not what competitors charge. A statement about who you are for — and most early startups price far too low.
Four approaches:
Cost-plus — your costs plus a margin. Almost always wrong for software, where marginal cost is near zero. Competitor-based — what similar products charge. A reference point, not a strategy. Value-based — a share of the economic value the customer receives. Usually correct. Usage-based — scales with consumption. Fair, harder to forecast.
Most software should be priced on value, with competitors as a sanity check.
Because price is the fastest lever you have on the whole business. A 20% price rise usually flows almost entirely to gross profit, since the cost of serving one more customer is close to zero.
And because underpricing does far more damage than founders expect: it starves you of the margin needed to sell, it signals low value, and it attracts customers who churn.
The scheduling tool. The value calculation first:
Capturing 10–20% of delivered value is a common range, which suggests $120–$240/month.
The founder's instinct was $29/month, because that felt safe and comparable to consumer tools.
At $29 with a $200 CAC, payback is nearly 9 months and there is no margin to hire anyone to sell. At $149 payback is under 2 months and the business works.
Same product. The price is the difference between a business and a hobby.
A useful early test: if nobody ever pushes back on your price, it is too low. Some friction is a sign you are near the right number.
First-time founders price low out of fear, and it backfires in four ways: no margin to fund sales, a signal that the product is not serious, attracting price-sensitive customers who churn most, and near-impossible price rises later.
The second mistake: too many tiers too early. Three at most. Complex pricing at ten customers is a decision you have no data to make.
The third: discounting to close the first deals. It sets a reference price that follows you, and those customers talk to each other.
Time saved × their hourly cost, plus errors avoided, plus revenue enabled. Get this from your interviews.
A common range that leaves obvious value with the customer while giving you real margin.
Not to match — to know what the buyer will consider normal, and to have an answer if you are higher.
Does this price make payback affordable? If not, the price is wrong, not the CAC.
Complexity early is guesswork with extra steps. Add tiers when you have segments, not before.
Grandfather existing ones. It removes the fear from experimenting and keeps your early supporters loyal.
Before your first sale, and reviewed every six to twelve months.
Do not obsess over price with fewer than ten customers — you cannot yet see value delivered. Pick something defensible and revise.
Apply this to your own startup in My Full Journey (free account).