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Comment by harryf | Hacker News Reader

As an occasional B2B SaaS buyer, the key point in getting your pricing right / wrong is knowing where the limits are for;

a) I can just get this on my company credit card without needing approval

b) OK for this price it's going to show up as a line somewhere in a budget and / or I'm going to have to get approval from my boss ( 1-2 meetings work )

c) For THAT price I need to trigger a whole enterprise process, have a ton of meetings, make the case

Mostly you want to stay in a) for volume sales. Once you start getting into b) and c) you start needing support agreements, enterprise sales people etc. plus b) and c) make work for the customers that are your "adopters" in the enterprise - they need to love your product for that to happen.

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Joel Spolsky

“Camels and Ducks” (2004)

https://www.joelonsoftware.com/2004/12/15/camels-and-rubber-...

Thought of the same article.

Would you mind sharing where the price cliffs are for (a), (b), and (c)?

Just curious.

Not GP, but in my experience:

- A: 10-499/mo

- B: 500-4999/mo

- C: 5000+/mo

Mostly agreed, but your section a goes too high. 400$ per month can't just be quietly expensed in most orgs I've worked for. I'd say max $50-$100 per month.

It’s also about platforms. For example, it’s easy for me to spend several thousand a month in AWS because as a company we spend a double digit millions amount for it already. However, if I want to buy a new product oh boy will I be in a procurement process. For any amount at all from a new platform / vendor I will have to have at least three meetings with increasing audience plus fill out a procurement application at least twice (once with my best guess at what should be in there, second with what the last meeting agreed on). Not price, but existing relations is the biggest factor atm.

That said, I’ve also worked at a startup accelerator on rigorous pricing validation for startup business plans. So I have some ideas about the thresholds and know for a fact that they exist. But it’s never as easy as a single number. If anyone’s interested in discussing some data, feel free to hit me up. Only saas targeted at (mainly) small to large business though.

So buying some software via AWS Marketplace would be the best option to avoid procurement burden, no?

It depends. Some orgs have IT credit-cards specifically for this purpose, and those usually have limits from $1k to $10k.

Do those credit cards auto refill yearly?

At least for me it’s functionally a monthly limit. Finance puts a limit on my company card and pays the bill every month.

It depends on the person who's making the purchase. I've dealt with VPs of programs in the past that had no problem putting $10k per month onto their corporate card without much additional oversight, but I've also dealt with program managers and directors who topped out at 1/10th that.

It also depends on the company. Are you talking about Dell, Toyota or Lockheed, or are you talking about a regional business?

Usually I've encountered needing to go through an arduous traditional procurement process when any one lump of money that's being negotiated over or leaving the building is North of $100k

From my experience across FAANG and small to mid-size startups both...

(one time or per year, monthly being 1/12th the amount)

A - <$2,500

B - <$20,000

C - more than $20k

At many companies, people can expense up to $50 with minimal (no?) prior approval via providing a receipt. That's a great place to be for tools that are useful in your job but not required.

Beyond that, most companies need more documentation or prior approval from your boss (only). The upper limit for that is often $500. That means whether something is $60 or $499, it can take exactly the same effort.

Above that, it often requires boss' boss' approval or a real line item in the team/department budget. The upper limit for this is all over the map, I've seen anything from $1000/month or $10k/year. Once you cross into this zone, assume customization, a more complex sales process, and you've left the realm of expense reports and moved into Purchase Orders (POs).

Above there, this is starting to look like enterprise software sales which is a beast unto itself. This likely turns into competitive bidding, a dedicated sales force, custom contracts & TOS, and a lot of other things. IF you can be successful here though, you can do quite well, especially if you've figured out how to make it repeatable and scalable.

This is a great comment - I would add that for the $50 price point / pricing stage, it is also low enough for an "operator" (someone using your SaaS to help their daily work) to just put their credit card in first, and then worry about claiming back from their company later.

The "pinch" of buying is therefore low enough to encourage uptake. If the base price level is higher than this, then that itself becomes another mental task for the potential customer to work through before pulling the trigger. This doesn't mean you shouldn't have higher priced plans (you must!), but from my experience $50 or even $99 as the upper end of the "base" plan is a good first threshold to get prospects to be ok with putting their credit card in.

But with all those things, beware of the recurring expense problem: I would agree with all those cliffs, for one-time expenses.

As soon as payments are recurring, things will be more complicated: Being bound to a contract beyond the current year is often subject to approval, at least when recurring payments are involved. Not yet paid but binding future obligations have to occur in various reports and need accounting involvement. Better have short contracts with autoextension or at least the possibility to pay up front for a fixed term.

> Better have short contracts with autoextends

Does that mean monthly recurring payments?

Or is that too short? did you mean yearly?

> the possibility to pay up front for a fixed term

What's a good fixed term, maybe one year? Or a few years?

> Does that mean monthly recurring payments?

Usually yearly should be fine, however, monthly would reduce customer anxiety (not sure if thats very relevant for B2B) but increase possible administrative overhead on your side.

> What's a good fixed term, maybe one year? Or a few years?

Longer than your usual recurring term. I'd say 2 to 5 years. The right term depends on the overall cost of that package: you should price them below the next-higher aforementioned cliff of course. If you usually offer yearly $20 contracts, and you have determined a typical cliff to be at $50, you could offer a 3year package for $49.

Also consider other factors: you might not want to support a version for the whole fixed term. And you definitely don't want to sell anything perpetual or semi-perpetual.

Thanks for the help

> prior approval from your boss (only). The upper limit for that is often $500

Is that per year or month?

Or one time things? Like a lifetime software license

They can probably do it once or twice in a given year without having to move into the next level. If a company is particularly flexible, you can probably do it annually without much pain.

Any commentary on the relative price ranges of each category? Do you think there’s further segmentation based on the size of the company, or the employee level within the company (i.e. engineer vs c-suite)?

There's definitely segmentation by role.

As an example, the product in the linked article is designed to be customer facing, and at the very least, linked to from within an app or site. The person who decides to take that direction is some sort of product owner.

If a person has the authority to decide to incorporate that sort of product (accept & expose feature requests) into their app but doesn't have the authority to sign off on a few hundred dollars a month, then something very unusual is going on.

On the flip side if you're selling something to an individual engineer then the price point is a lot lower. A developer might have autonomy to pick their tools, but they typically won't have the authority to sign off on a large expense.

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