Model your SaaS pricing tiers, forecast recurring revenue, and see whether your unit economics actually work — before you launch or adjust your pricing page. Enter your costs, design up to 4 tiers, and watch MRR, ARR, and LTV update in real time.
Pro tip: Most successful SaaS products use three tiers. The middle tier should be 2–3× the lowest — it becomes the anchor that makes the top tier feel like a bargain by comparison (the “decoy effect”).
| Month | Customers | Paying | New | Churned | MRR |
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| Month | 2% Churn | 5% Churn | 8% Churn | 12% Churn |
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How to Price a SaaS Product
Pricing a SaaS product is equal parts math, psychology, and market strategy. Start by understanding your cost per user — every dollar spent on hosting, support, and development that scales with each customer. Then apply a target gross margin of 70–85%, which is the industry benchmark for healthy SaaS businesses. The difference between revenue per user and cost per user determines whether your business can invest in growth or is slowly bleeding cash.
This calculator walks you through the full model: define your costs, set up pricing tiers with monthly and annual options, estimate customer volume and churn, and see the resulting unit economics in real time. It is designed for founders, product managers, and finance teams who need to pressure-test pricing decisions before they go live.
Value-Based vs. Cost-Plus Pricing
Cost-plus pricing takes your cost per user, adds a margin, and calls it done. It is straightforward but often leaves money on the table because it ignores what the customer is actually willing to pay. Value-based pricing starts from the other direction: how much value does your product create for the customer? If your tool saves a business $500/month in manual labor, charging $49/month is a no-brainer for them — even if your cost per user is only $3.
The best approach blends both. Use your cost floor (from this calculator) as the minimum, then layer in willingness-to-pay data from customer interviews, competitor benchmarks, and the specific outcomes your product delivers.
The Psychology of Pricing Tiers
Three tiers work because of the compromise effect — most people avoid the cheapest and most expensive options and gravitate toward the middle. Structure your tiers so the middle plan is your ideal customer path, and the top plan makes the middle look reasonable by comparison. This is called price anchoring.
- Charm pricing — $29, $49, $99 convert better than round numbers in most B2B SaaS contexts
- Decoy pricing — a plan that is close in price to the top tier but far less feature-rich pushes customers up
- Good-better-best — label your tiers to signal progression rather than limitation
Annual vs. Monthly Billing Strategies
Offering an annual plan with a discount (typically 15–20%, equivalent to giving two months free) reduces churn, improves cash flow, and increases customer lifetime value. Annual customers churn at roughly half the rate of monthly subscribers because they have more time to see value and build habits around the product.
Position the annual price as the default and display the monthly price as the fallback. Showing savings like “Save $58/year” converts better than showing the percentage discount alone. Some companies hide the monthly option entirely, offering only annual billing to simplify the decision.
How to Calculate LTV and Why It Matters
Customer Lifetime Value (LTV) is ARPU divided by monthly churn rate. If your blended ARPU is $65/month and churn is 5%, LTV = $65 ÷ 0.05 = $1,300. This is the total revenue you can expect from an average customer over their lifetime. LTV drives every growth decision: how much you can spend on acquisition, which channels are profitable, and when to invest in retention over new customer growth.
The LTV:CAC ratio compares lifetime value to what you spend acquiring each customer. The industry benchmark is 3:1 or higher — you earn at least three dollars for every dollar spent on acquisition. Below 2:1, your business is likely unprofitable at scale. Above 5:1, you may be under-investing in growth and leaving market share for competitors.
When to Raise Prices
Most SaaS founders raise prices too infrequently. If your product has improved significantly since launch, your pricing should reflect that added value. Consider a price increase when your LTV:CAC ratio exceeds 5:1 (you have room to grow), when your gross margin exceeds 85% (you are delivering more value than you charge for), or when customers tell you in surveys that they would still buy at a higher price.
Grandfather existing customers at their current rate for 6–12 months, communicate the change clearly with at least 30 days notice, and tie the increase to specific new features or improvements. A well-executed price increase rarely causes more than 1–3% incremental churn, but it immediately boosts MRR by 10–30% depending on the size of the adjustment.
Understanding Monthly Churn and Its Compounding Effect
Churn is the silent killer of SaaS growth. At 5% monthly churn, you lose roughly 46% of customers over a year — meaning you need to acquire nearly half your customer base again just to stay flat. At 2% churn, you retain 78% annually, and growth compounds much faster because you keep more of what you gain. Even a one-percentage-point improvement in churn can translate to 20–30% more revenue over 12 months, which is why retention is often the highest-leverage investment a SaaS company can make.
Looking for related tools? Try our Margin Calculator to calculate profit margins and markups, or our Runway Calculator to find out how long your cash reserves will last. Explore all Freelance & Business tools.