"Usage-based pricing is more than a trend; it's the future of software. I'm sharing our complete playbook for scaling a usage-based model to $100M, covering everything from the metrics you need to track to the team you need to build."
I tweeted that a while back, and it blew up. Clearly, I struck a nerve. Founders are tired of the old way of selling software. They're tired of the endless demos, the bloated sales teams, and the churn. They're looking for a better way, and I'm here to tell you that there is one: Product-Led Growth (PLG).
I didn't just read about PLG in a blog post. I lived it. I used it to build and sell two companies, RemoteTeam (acquired by Gusto) and MovieLaLa (acquired by Gfycat). And I've invested in over 200 companies, including some of the fastest-growing PLG businesses on the planet, like Anthropic, OpenAI, Scale AI, and Hugging Face.
This isn't some theoretical, academic guide. This is the real-deal, in-the-trenches playbook. The one we used to scale a usage-based model to $100M in revenue. I'm going to share everything I've learned, including the metrics that matter, the team structure you need, and the customer communication strategy that will make or break you.
So, if you're ready to ditch the old playbook and build a business that grows itself, you've come to the right place.
My Wake-Up Call: From Sales-Led Hell to Product-Led Heaven
I wasn't always a PLG believer. In the early days of RemoteTeam, we were stuck in what I like to call "sales-led hell." We had a great product for managing remote teams, but our growth was painfully linear. We were burning cash on a big sales team, doing endless demos for leads that weren't a good fit, and celebrating when we closed a $5,000 deal. It was a grind.
I remember one quarter, we spent $250,000 on sales and marketing and only brought in $150,000 in new revenue. We were upside down, and I was starting to question if we were ever going to make it. We were working our butts off, but we weren't getting anywhere. The classic hamster wheel of burning venture capital to acquire customers who might churn in six months.
Then, something magical started to happen. We noticed a small but growing number of users signing up for our free plan, using the product, and then upgrading to a paid plan without ever talking to a salesperson. They were converting themselves. At first, we didn't think much of it. But the cohort grew. And these self-serve customers were happier, churned less, and were actually our most profitable segment.
That was my epiphany. The lightbulb moment. We were spending all our energy trying to push a boulder uphill with sales, when we had a river of customers who just wanted to swim downstream. The product was selling itself. We just had to get out of its way.
What is PLG, Really?
Let's cut through the jargon. Product-Led Growth is a go-to-market strategy that relies on the product itself to acquire, activate, and retain customers. Instead of a sales team leading the charge, the product does the heavy lifting.
Think about the last time you used Slack, Calendly, or Dropbox. Did a salesperson call you? Did you sit through a one-hour demo? No. You signed up for free, you used the product, you saw the value, and then you (or your boss) happily paid for it. That's PLG in a nutshell.
It's a fundamental shift from selling to the C-suite to serving the end-user. The old model was about convincing a VP of Sales to buy your CRM. The new model is about creating a CRM that salespeople love to use so much that they convince their VP to buy it for the whole team.
This isn't just about offering a free trial or a freemium plan. It's a complete business philosophy that touches every part of your company, from product development to marketing to customer support.
The $100M Usage-Based Pricing Playbook
PLG and usage-based pricing are two sides of the same coin. Once you have a product that people love, the next step is to align your pricing with the value they receive. That's where usage-based pricing comes in. It's the most logical, fair, and scalable way to monetize a PLG product.
Here's the four-step playbook we used to implement it and scale to nine figures.
Step 1: Find Your Value Metric
This is the most critical step. Your value metric is the unit of value that your customers get from your product. It's what you're going to charge them for. Get this wrong, and your entire strategy will fall apart.
A good value metric has three characteristics:
- It's easy for the customer to understand. No one wants to get a bill with a bunch of confusing line items. It should be simple and intuitive.
- It aligns with your customers' success. As your customers get more value from your product, they should pay you more. This creates a win-win situation.
- It grows with your customers. Your value metric should be able to scale from a single user to a massive enterprise.
Some great examples:
- Twilio: Per API call or message sent.
- Snowflake: Per compute credit used.
- AWS: Per gigabyte of storage or hour of compute.
At RemoteTeam, our value metric was the number of active users. Simple, fair, and it scaled perfectly as our customers grew their remote teams.
Step 2: Design Your Pricing Tiers
Once you have your value metric, you need to design your pricing tiers. The goal here is to make it as easy as possible for customers to get started and then grow with you over time. The "free, better, best" model is a great starting point.
- Free: This is your acquisition channel. The goal of the free plan is to get as many users as possible to experience the core value of your product. It should be generous enough to be useful, but limited enough to encourage upgrades.
- Better (Pro/Team): This is your first paid tier. It's for users who are getting real value from your product and are ready to pay for more advanced features or higher usage limits. This is where you'll make the bulk of your revenue in the early days.
- Best (Enterprise): This is for your largest customers. It includes all the features of the pro plan, plus enterprise-grade features like SSO, advanced security, and dedicated support. This is where you'll land your biggest deals.
Don't overcomplicate it. Start with a simple, three-tiered structure and iterate over time based on customer feedback and data.
Step 3: Instrument Your Product for Growth
You can't have usage-based pricing without usage-based tracking. You need to have the right infrastructure in place to monitor how your customers are using your product and bill them accordingly. This is not a trivial task, but it's absolutely essential.
You'll need to build or buy a system that can:
- Track usage of your value metric in real-time.
- Handle complex billing logic (e.g., overages, prepaid credits, pay-as-you-go).
- Integrate with your payment gateway and accounting software.
- Provide customers with a clear and transparent view of their usage and billing.
This is a major engineering investment, but it's one that will pay for itself many times over. The data you collect will not only power your billing system, but it will also give you invaluable insights into how your customers are using your product, which you can then use to make it even better.
Step 4: Communicate, Communicate, Communicate
Switching to usage-based pricing can be a scary proposition for your existing customers. They're used to paying a predictable, flat fee, and now you're telling them that their bill could change every month. You need to handle this communication with care.
Here's how:
- Be transparent. Explain why you're making the change and how it will benefit them. Frame it as a fairer way to pay for the value they receive.
- Give them plenty of notice. No one likes surprises when it comes to pricing. Give your customers at least a few months' notice before you make the switch.
- Grandfather in existing customers. This is a great way to show goodwill and reduce churn. You can offer to keep them on their old plan for a year or even indefinitely.
- Provide a usage calculator. Help your customers estimate what their bill will be under the new model. This will reduce anxiety and build trust.
We did all of these things when we switched to usage-based pricing at RemoteTeam, and we had almost zero customer churn as a result.
The PLG Team: Who You Need to Hire
Building a PLG company requires a different kind of team. You can't just hire a bunch of traditional sales and marketing folks and expect them to figure it out. You need a cross-functional growth team that is obsessed with the product and the user experience.
This team should include:
- Growth Engineers: These are full-stack engineers who are comfortable working across the entire product, from the front-end to the back-end. They are experiment-driven and move fast.
- Product Designers: They are responsible for creating a seamless and intuitive user experience that guides users to the "aha!" moment.
- Growth Marketers: They are data-driven marketers who are experts in acquisition, activation, and retention. They live and breathe A/B testing.
- Data Analysts: They are the brains of the operation. They are constantly digging into the data to find insights that will drive growth.
This team should report directly to the CEO or a Head of Growth, and they should have the autonomy to run experiments and make changes to the product without a lot of red tape.
The Future is Built by Users, Not Sold by Salespeople
I've seen the power of product-led growth firsthand, and I'm convinced that it's the future of software. The companies that embrace this new way of thinking will be the ones that win in the long run. The ones that don't will be left behind, stuck in the mud of sales-led hell.
Building a PLG company isn't easy. It requires a different mindset, a different team, and a different way of thinking about growth. But the rewards are immense. You'll build a better product, have happier customers, and create a business that grows faster and more efficiently than you ever thought possible.
So, my question to you is: Are you ready to join the revolution?
Frequently Asked Questions
How often is this guide updated?
I revisit and update my guides regularly as I learn new things and as the market evolves. The core principles tend to stay stable, but specific tactics and tools get refreshed based on what's working right now.
What if I disagree with some of the advice?
Good. That means you're thinking critically, which is exactly what a good founder should do. Take what resonates, test it, and discard what doesn't work for your specific situation. No advice is universal.
Is this guide based on real experience?
Every recommendation in this guide comes from direct experience, either from building and selling my own companies, or from patterns I've observed across 200+ angel investments. I don't write about things I haven't personally tested.
Who is this guide designed for?
This guide is written for founders and operators who want practical, actionable advice rather than theoretical frameworks. Whether you're just starting out or scaling an existing business, the principles here apply across stages.