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Ask HN: Pricing SaaS based on how much it cost to develop?

2 points by altern8 ↗ HN
I'm trying to make sure that pricing for a SaaS is correct.

Is there anything like finding a price based on how much it cost to develop the service?

For instance, if it cost 500K, $100/mo. at a minimum, or things like that?

8 comments

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downrightmike
Price is based on the value. If you are unsure of the value, ask. Or 3x cost and find the metrics for your break even point then charge that. (# users * $$ * Months) = B/E
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altern8
Thanks.

I'll definitely do some research to find out how much people value the service, but I also want to make sure not to undercharge.

After how long is usually break even? 1 year?

Thanks for you help.

AkiraMichi
No! That is not really how most people calculate how much to charge for a SaaS product. Usually, it comes down to two things.

First, what's the total per-user cost? That includes, servers, storage and even the user acquisition cost. i.e. ads. Second, what is the product worth to the user in terms of it solving their problems. For example, if the product costs $10 and it saves them between $100 to $500 per month. It's something they will likely be fine with. Simply put, it's about the cost-to-value for the customer. How much are they willing to pay to solve their problem. It can be a $1 or even $1000 per-month.

I would advise you to research your potential customers and find out these things for yourself.

Good luck!

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altern8
Thanks for your reply. I'm aware of how you price things, but I'm also aware that often amateurs (like me in the SaaS world) tend to underprice things. That's why I thought I could see if this was possible to make sure I didn't pick too low a price.
AkiraMichi
You're right, in that people starting out usually end up undercharging for their product. Though, all I can say without anymore information about your individual case. Is, to take what you find the cost should be and then double it. And if you can, run a A/B test while you increase your products cost to see if people are willing to pay the higher amount. And, if they are. Then increase the price until you find an equilibrium for your product where you don't lose customers because of too high of a cost. But, where you don't either undercharge for it.

Finding this balance will require some work. But, using analytics and A/B testing should help guide you towards the right price point.

altern8
Thanks.

I think I'll just do that.

Actually read Amy Hoy saying to double the price you have in mind and that's the correct price, but I'm still afraid to undercharge even with that.

I'll start with doubling and then do A/B testing.

Thanks for your help.