Is usage-based pricing right for your B2B SaaS? It's not a simple yes or no answer. I'll walk you through the pros and cons, the ideal customer profile for UBP, and a decision framework to help you determine if it's the right model for your business.
The Counterintuitive Truth
In usage-based pricing, the best practitioners often do less, not more.
The lesson: simplicity beats complexity every time. It sounds simple. It's incredibly hard to execute.
Why Most Approaches Fail
Many common approaches to usage-based pricing are flawed at the root.
The root cause is usually one of three things:
Copying what big companies do without understanding why they do it. What works for Google doesn't work for a 10-person startup.
Over-engineering the solution when a simple approach would work better. I've seen teams spend six months building something that could have been done in two weeks.
Ignoring the human element. Technology is the easy part. Getting people to actually use it is where the real challenge lives.
Lessons From the Trenches
I want to share a few specific lessons I've picked up over the years. These aren't theoretical. They come from real companies, real failures, and real successes.
Lesson 1: The best time to start thinking about usage-based pricing was yesterday. The second best time is now. Don't wait until you have the perfect plan.
Lesson 2: Hire for attitude, train for skill. The best people at usage-based pricing are rarely the most technically gifted. They are the most curious and persistent.
Lesson 3: Your competitors are probably getting this wrong too. That's your opportunity. While everyone else is following the same playbook, you can zig when they zag.
This connects to broader themes around usage-based pricing, SaaS metrics, AI pricing models, serverless AI that I've been thinking about a lot lately.
Final Thoughts
There are no shortcuts in usage-based pricing, but there are smarter paths.
The strongest teams treat usage-based pricing as a competitive advantage, not a checkbox. They invest in it early, measure it obsessively, and never stop improving.
If you're just getting started with usage-based pricing, don't be intimidated. Everyone starts somewhere. The key is to start with the right mindset and the right framework, and then execute like your company depends on it. Because it probably does.
Frequently Asked Questions
Q:What's the most common pushback you get on this?
People often push back by citing exceptions or edge cases. And they're usually right that exceptions exist. But building a strategy around exceptions rather than patterns is a losing game for most founders.
Q:What experience informs this perspective?
This perspective comes from over a decade of building companies in Silicon Valley, two successful exits (RemoteTeam to Gusto, MovieLaLa to Gfycat), and investing in 234 startups including Anthropic, OpenAI, and Scale AI. I write about what I've lived.
Q:How can I apply this thinking to my own situation?
Start by identifying the core principle behind the opinion, not the specific example. Then ask yourself: does this principle apply to my context? If yes, test it in a small, low-risk way before going all in.