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Pricing is one of the most consequential decisions you will make as a founder - and one of the least well understood. This section gives you a structured, defensible way to arrive at a launch price grounded in reality rather than instinct: a cost floor below which you cannot go, a competitor anchor that tells you what the market expects, and a value ceiling that tells you what your product is actually worth. Pricing at launch is a starting hypothesis, not a permanent decision. The goal is to get to market with a price you can justify, then refine it based on what you learn. The founders who get pricing right do not guess - they construct a defensible position and adjust it with evidence. Note: if your product has complex pricing requirements -enterprise contracts, multi-sided marketplaces, regulated pricing environments - treat this as a starting point only and seek specialist advice.
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Read all four principles below before starting the pricing work. They apply regardless of whether you are pricing a SaaS product, a physical product, a service, or a consumer app - and they will change how you approach the inputs in Parts 2 and 3.
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Your price communicates value before your customer has experienced your product. A price that is too low signals low quality or low confidence. A price that is too high without clear justification signals disconnection from your market. Your price should be consistent with your positioning - a premium product commands a premium price, but only if the rest of your brand and messaging supports it. Before you set your price, ask: what does this price say about my product?
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Many founders price by ‘adding a margin’ to their costs. This is understandable but risky - it has nothing to do with what your customer is willing to pay or the value you’re delivering. Your costs set the floor below which you cannot price sustainably. Everything above that floor should be determined by value and market dynamics - not by your cost structure. And if you have a product that is first to market, it should be priced to capture as much value as possible now before your first competitors enter the space and start competing on price. And trust me, they will.
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The most powerful pricing approach is value-based pricing - setting your price relative to the value your product delivers to your customer, not relative to your costs or your competitors. Value-based pricing requires you to understand what your product is worth to your customer in concrete terms: time saved, revenue generated, risk reduced, cost avoided. It is harder to implement than cost-plus pricing but almost always results in higher margins and better customer relationships.
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Few pricing models survive first contact with the market unchanged. Your launch price is your best current hypothesis about what the market will bear. Build in a plan to test, learn and adjust - and don’t be afraid to raise your prices as you accumulate evidence of the value you deliver. A lot of early-stage founders underprice - if every prospect says yes without hesitation, your price is probably too low.
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Before you set a price, choose the right pricing model for your product type, customer and sales motion. The wrong model - even with the right price point - can significantly slow your growth. Use this guide to identify the model that fits your product best.
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| Pricing model | How it works | Best for | Watch out for |
|---|---|---|---|
| One-time payment | Customer pays once for lifetime access to the product or service | Digital products, templates, tools, courses, productised services with a defined scope. Both B2B and B2C. | No recurring revenue makes growth harder to predict and fund. Works best when acquisition costs are low and word of mouth is strong. |
| Subscription (recurring) | Customer pays a regular fee (monthly or annual) for ongoing access | SaaS products, membership communities, ongoing services, content platforms. Both B2B and B2C. | Churn is your enemy. If your product does not deliver ongoing value, customers cancel. Annual plans improve predictability — offer a discount to incentivise them. |
| Usage-based (consumption) | Customer pays based on how much they use — per transaction, per user, per API call, per unit | Infrastructure products, platforms with variable usage, products where value scales with usage. Primarily B2B. | Revenue is harder to predict. High-usage customers are valuable but can also be unprofitable if unit economics are not carefully managed. |
| Tiered (good / better / best) | Multiple price points with increasing features or capacity at each tier | Products with a range of customer segments with different needs and willingness to pay. Both B2B and B2C. | Too many tiers create confusion. Three tiers is almost always the right number. Make the middle tier the most attractive — it anchors perception and drives the majority of conversions. |
| Freemium | Core product is free, advanced features or higher usage require payment | Products with low marginal cost to serve, strong network effects, or a clear upgrade trigger. Both B2B and B2C. | Free users are expensive to serve and most never convert. Freemium only works if your conversion rate to paid is high enough and your cost to serve free users is low enough. Do the maths before you commit. |
| Value-based | Price is set relative to the quantifiable value delivered to the customer — typically a percentage of the value created | High-value B2B products where ROI is measurable — consulting, enterprise software, revenue-generating tools | Requires deep understanding of customer economics and strong proof of value. Difficult to implement without existing customer data. Best suited to later-stage products with proven outcomes. |
| Project or scope-based | Fixed price for a defined deliverable or project — common in services and productised consulting | Productised services, agencies, consultants, custom development. Primarily B2B. | Scope creep is the primary risk. Define deliverables and boundaries precisely before you agree a price. Always document what is and is not included. |
| Your chosen pricing model | [Name the model you have chosen. Then note: (1) why this model fits your product, customer, and sales motion, (2) which model you considered as the next best alternative, and (3) why you rejected it. Documenting what you did not choose — and why — is as strategically valuable as documenting what you did.] |
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JSON Prompt - Pricing Model Advisor Copy and paste this into Claude, Gemini, Perplexity or Notion AI. As always, don’t forget to include the inputs I’ve highlighted in red font within the prompt: