We found SaaS enterprise pricing to be confusing at first but having been through the process enough now, here's our advice for our younger selves. We cover 3 different enterprise deals for Upscope co-browsing and how each turned out.
Important read: Why Serial Entrepreneurs do Go-to-Market Strategies first
What's an enterprise customer?
Any large company paying around $1,000+ per month is enterprise for Upscope.
Upscope is a co-browsing solution. They're typically looking to buy our product for their customer success, account and support teams or to use our API to completely white label our solution for their own internal needs or as part of a product they sell to their customers.
Enterprise 1: Mid-sized company
They want to build Upscope into their own support tool so their staff can instantly screen share with customers.
They'll need to use our REST API for the integration, which is only available with the enterprise plan and normally for higher volumes.
What should we charge them?
Charge them the standard business plan fee + an extra $10 per agent.
This is a little unusual.
If you looked at most of our enterprise deals then rarely do we charge them extra. In fact we have volume discounts.
However, in this case they are not purchasing a large volume but want to use the Enterprise level API.
Why charge them this rate?
They are not purchasing a large volume but need our API which sits on the enterprise plan which is normally for large volumes.
They're going to need an individual service level agreement and a whole raft of additional docs signed up.
They have lots of additional processes and procedures around data security.
They're going to require a lot of support while they integrate it and get going.
They care about the pricing but don't mind paying extra as long as they feel it's for the right reasons as they wish to get good support over time, so be up front about it.
The size of the company has little do with the amount of support time they require. In this business, as data security is so important, some of the smaller companies have more processes than the larger ones when it comes to clearing a 3rd party product for use.
Note: Much of enterprise pricing involves discounting for larger volumes but there was none in the above case, where they had fewer numbers but needed enterprise features along with a unique service level agreement.
Enterprise 2: Billion dollar established company
They want to purchase our standard business plan for a large number of internal support and account management staff.
What should we charge them?
Our standard business plan pricing. They fall below our volume discounts but they never even asked for a discount or even appear to care about it.
It works for them.
They want to trial it for a long time and see the ROI. After that, they just want the standard pricing until they decide otherwise.
Their primary concern is solving their own problem. The value we provide is far greater than our per seat pricing so they are not concerned with the price.
I'm also hearing that some 20% of larger enterprise customers of SaaS companies are paying monthly when in the past they paid annually by default. These guys are happy paying monthly and they've been customers for years now.
Some deals are simple, so let them be simple by being patient.
Good fast responses matter because they probably contacted a number of other co-browsing companies.
We answered all their key questions quickly and accurately and that may have been the primary reason they went with us.
They care about about data security because they have a department that cares about data security so the people who first signed up need to pass on the key data security related information to that department. Have the docs and answers listed on the home page and in help files and maybe in a pdf too.
They didn't really bring up pricing much because the value they would gain from the product made ROI calculations very simple.
I wish all deals were this simple.
Enterprise 3: Usage based pricing for white label fast growing SaaS company
They want to completely white label our product as part of their product which they're selling to other large organisations.
What should we charge them?
The per seat pricing does not work for them because they don't know how many people will need it month to month.
This company and many like it NEED hourly or transactional pricing because they might be pricing to their clients per hour or per event (every time they use it) rather than per seat.
Do usage based pricing.
Instead of charging per seat, charge per hour their customer's support agents use it but have a minimum number of hours per month you'll charge by default.
Also, get 6 months of payments in advance.
Talk to them, understand their situation and their potential ROI from using Upscope and remember that they'll need extensive support in the early stages.
They don't know how much their customer's support agents need Upscope yet but it'll minimally be X hours per month given our previous average usage figures for that industry. Figure out X with them and charge for it.
They are quite used to paying annually for software though in this case they need to re-assess every 6 months so charge them 6 months in advance rather than annually.
Companies like this need to know that our product will still work for them even if something happens to our company. On-premise licensed software which they can independently run if something were to happen to Upscope matters to them.
Enterprises 4, 5, 6, 7...
- They expect volume discounts if they're buying at volume. We have ready to go pdfs which show them volume pricing with discounts. We have one pdf for each major currency we most commonly work with: US dollars, Euros, Pounds.
- Departments have budgets and apparently prefer to know what the total cost is so they can see if it fits in their budget. I had not considered this very obvious fact. The figure that sounds big to me might just be a "pfft" for them so no need to be shy about it.
- They might want help with onboarding, training, implementation and more. They expect you to charge for this as an additional services fee. We have not done this so far but it has come up. So far we've only charged for extra custom development work.
Perpetual license deals with annual fees
I'm adding this here because when one partner first mentioned "perpetual licenses" it confused the hell out of me.
If they mention perpetual license deals then they're operating in a different way to your normal per seat pricing. We come across this licensing model when we're talking with companies that want to partner with us and integrate our systems into theirs to sell to their large clients.
The partner might want to buy 1,000s of seats to sell to their clients. This leaves you imagining 10,000s of dollars per month in revenue but you can't force your pricing on their perpetual license business model they already work with.
They might be charging their clients a one-off fee per seat e.g. $800 one time (perpetual license) and they then charge an annual maintenance fee per seat e.g. $240. The annual maintenance fee is the recurring revenue.
They might add your service on as an additional $300 one off fee and $30 annual maintenance charge service. We're still learning about these models so this is just an example but this roughly how it works.
What questions do enterprises ask us? They'll look for trust.
Where are you based? How many people in your company? They're wondering if we're for real and can be trusted. They don't want to buy a product from lunatics running a scam. That about us page matters. That Linkedin profile matters.
Who else have you sold to before? Any big companies? Some of the business development guys ask if we've sold our product to large companies before because they're evaluating us as an acquisition as much as tool to integrate. Damn odd experience the first time round. It's a very long term process with these guys.
Are you funded? They're asking if Upscope is about to go down any time because of a lack of money and the right response is to tell them that this is not our first startup and we're self-funded, profitable and stable. If they're looking to do an on-premise integration then tell them it will continue to function even if Upscope did somehow die.
Can you do a POC (Proof of Concept)? Imagine you're on a demo call with a potential big buyer and they say they want to 'Do a proof of concept' and you just say 'yes, I am sure that is possible' when in fact you don't know what a proof of concept is. They're talking about a trial.
This is basically the company saying they don't really know how many people are going to use your product and they need to test it out. This could be an extended trial period or some other way of proving the product. You might charge for this extra trial period or you might not. You could even charge for it and then deduct it from the annual payment they'll make after. Read more about POC here.
Why are these companies interested in Upscope?
We all now recognise how much good onboarding and support can impact revenue and churn.
Most of us are still using old broken technology to do it.
If you use Netflix, Spotify or Instagram and want to know why they buy Upscope then read this article on why you onboard people to Netflix better than to your own app.