The pricing decision you make in the next 30 days will determine if your startup thrives or dies. Here's how to get it right.
You've spent 6 months building your product. You've got beta users who love it. Launch is in 2 weeks. Then someone asks: "What are we charging?"
Someone throws out "$29/month" because that's what a competitor charges. Everyone nods. You launch. Six months later, you realize you're losing $40 on every customer.
This is how most startups price their products. They guess, copy competitors, or pick a "nice sounding" number. Then they spend years trying to fix it.
Changing your pricing after launch is exponentially harder than getting it right the first time. Existing customers revolt. Your brand gets damaged. Your economics fall apart.
You get one shot at this. Make it count.
"Let's calculate our costs and add 30% margin."
This is how you sell commodities, not how you build a startup. Your costs have nothing to do with your value. Slack doesn't charge based on their server costs. They charge based on saved productivity.
Real Example:
Photoshop costs Adobe maybe $5/user/month in infrastructure. They charge $54.99. Why? Because it's worth $54.99 to professional designers. Cost-plus would leave $50/month on the table.
"Our competitor charges $49, so we'll charge $39 to undercut them."
Race to the bottom, anyone? You don't know their costs, their strategy, or their mistakes. Maybe they're pricing wrong too. Maybe they're funded and burning cash for market share.
Reality Check:
Basecamp ignored competitors and charged 10x more than alternatives. They won because they sold on value, not price. Being cheapest is a terrible strategy unless you're Walmart.
"Let's launch at $9 to get users, then raise to $29 once we have traction."
You'll attract price-sensitive customers who'll leave the moment you raise prices. You'll train the market that your product isn't worth much. And you'll never have cash to build the features that justify higher prices.
The Trap:
Your early customers become your loudest critics when you raise prices. They'll complain publicly, tank your reviews, and tell everyone you're greedy. Meanwhile, quality customers who would've paid $29 never gave you a chance at $9.
Price based on the value you create, not the cost you incur. Simple concept, hard execution. Here's the step-by-step framework:
What unit of value do customers get? This should scale with their usage/success:
What does your customer gain? Revenue increase? Cost savings? Time saved? Be specific:
Example: HR Automation Tool
Your price should be a fraction of the value you create. The sweet spot:
For the HR tool creating $1,500/month value, pricing at $149-$399/month captures 10-26% of value. Customer gets $1,100-$1,350 in net benefit. Win-win.
Different customers value your product differently. Create tiers:
Starter ($49/mo)
Freelancers, side projects, small teams
Professional ($149/mo)
Growing businesses, agencies, teams under 50
Enterprise ($499/mo)
Large companies, mission-critical use, compliance needs
Started at $29/month when competitors like MailChimp were free. Positioned as "email marketing for professional creators."
Bloggers and creators earning $5K+/month from content need better tools than hobbyists. They'll pay for automation, deliverability, and support.
$29M ARR by focusing on customers who valued the product. Ignored the free users. Built features for paying customers. Won.
Launched at $9/month to "get users fast" and beat competitors at $29/month.
Attracted price shoppers who churned constantly. Support costs were $12/customer/month. Losing $3+ on every customer. Couldn't afford to build features to justify higher prices.
Raised to $29 after 8 months. 60% of customers canceled. Bad reviews everywhere. Reputation destroyed. Shut down 6 months later.
Launched at $30/month in a market with free alternatives (Gmail, Outlook).
Targeting executives and VCs who get 200+ emails/day. Saving 4+ hours/week on email. At $200/hr executive time, that's $3,200/month in value. $30 is a no-brainer.
Waitlist of 180,000 people willing to pay premium for a better email experience. Under 1% churn. Customers rave about it being worth 10x the price.
Before you launch, validate these pricing fundamentals:
Calculate your fully-loaded cost per customer
CAC + support + infrastructure + churn replacement. Your price must exceed this.
Interview 20+ target customers about value
"What would you pay for this?" is useless. Ask "What does this replace?" and "What does that cost you?"
Test pricing with real purchase intent
Show pricing page before launch. Track conversion rates. A/B test 3 price points with early users.
Model unit economics at different price points
What happens if you charge $29 vs $49 vs $99? How does conversion vs. LTV change?
Identify your value metric that scales
Can you charge more as customers get more value? Per-seat, per-usage, or per-outcome pricing.
Create 3 pricing tiers minimum
Give customers options. Most will pick middle tier. Anchor high tier to make middle seem reasonable.
Plan your annual pricing discount
Offer 15-20% off annual plans. Improves cash flow and reduces churn. Win-win.
Document your pricing rationale
Write down WHY you chose this price. You'll need to defend it to investors, team, and yourself.
Set a pricing review schedule
Commit to reviewing pricing every 6 months. Market changes. Your value changes. Prices should too.
Add a third tier that's slightly worse value than your target tier. Makes target tier look like the obvious choice.
Basic: $29/mo (5 projects)
Pro: $59/mo (12 projects) ← Nobody picks this
Pro Plus: $79/mo (Unlimited) ← Everyone picks this
$99 converts better than $100. But for premium products, round numbers ($500 not $499) signal quality.
Budget tool: $29/mo ✅
Mid-tier: $49/mo ✅
Enterprise: $500/mo (not $499) ✅
Show the most expensive option first. Everything else seems reasonable by comparison.
Enterprise: $999/mo
Professional: $299/mo ← Seems cheap now
Starter: $99/mo
Show price per day, not per year. $1/day sounds better than $365/year, even though it's the same.
❌ $588/year
✅ Less than $2/day
✅ About the cost of a coffee
You launched. Your pricing is working. Should you ever change it? Yes. Here's when:
Your pricing strategy is as important as your product features. Maybe more important.
Price too low: You attract bad customers, can't afford great features, and eventually die.
Price based on value: You attract customers who appreciate quality, can invest in product, and build a real business.
"If nobody complains about your pricing, you're charging too little. If everyone complains, you're charging too much. Aim for 20% of prospects saying 'too expensive' while the rest happily pay."
- Patrick Campbell, ProfitWell
PricingForge helps you calculate costs, model pricing scenarios, and validate unit economics before you commit to a price you'll regret.
Test unlimited pricing scenarios. Make informed decisions.