How to Price Your B2B Product Using Value-Based Pricing

One of my clients emailed me this week asking what to charge her very first B2B customer. It is one of the most common questions I get as a CEO coach. Below is the advice I gave her, along with a broader framework for thinking about value-based pricing at every stage of your startup.

Like most things in startups, there is no perfect answer on pricing. But here is how I think about it.

Why Value-Based Pricing Is the Right Starting Point for B2B

Value-based pricing means setting your price based on the value your customer receives, not on what it costs you to deliver the product or what competitors charge. For early-stage B2B companies, this is almost always the right model.

Here is why: your first customers are not just buyers. They are co-builders. The goal is not to maximize revenue from them. The goal is to learn what your product is truly worth to the people who use it most.

The Three Stages of B2B Pricing Strategy

Your pricing strategy will evolve significantly as your company grows. Here is a simple framework for thinking across three stages.

Stage 1: Early Days, Custom Enterprise Pricing

In early days I wouldn’t sweat pricing to much. In essence, each sale right now is a custom enterprise sale where we really want/need to get the customer for learning. So maximizing income from the customer is quite secondary.

That said, no reason to give away the farm nor give away the product for free. I’d learn what they will pay and offer it at or below that price.

At Twenty20, our first 10 customers paid anywhere from $0.01 to $100 per image. We later settled on $2 per image as we scaled. What those first 10 paid almost did not matter. What mattered was what we learned from them.

Stage 2: Growth Mode, Subsidize for Market Share

In growth mode, you will want to subsidize price in favor of growth to aggressively gain market share and to enjoy some word-of-mouth benefit from more customers talking about the product.

Stage 3: Scale, Optimizing the Clearing Price

At scale, pricing is determined by the clearing price on the supply and demand curve. You can get sophisticated with testing and optimization at this stage, but that level of precision is not needed until you have meaningful volume.

How to Discover What Customers Will Pay

Before offering a price at all, I’d suggest focusing on learning from the customer. Ask all the questions you can think of.

A few discovery questions that work well:

• How much value do you see in this solution over your current alternative?
• What would it save you in time, cost, or revenue per month?
• What would you expect to pay for something like this? What would feel fair?
• Is there a budget already allocated for this type of solution?

You can even ask questions like what would they like or expect to pay. You might get numbers higher than you were thinking.

Once we have 5–10 customers who love the product and with whom we have a lot of trust, they will tell us a lot about how to price. Take those reference customers and all the learning on the value they see in the product, and use it to inform your V2 pricing strategy.

Common B2B SaaS Pricing Models Compared

As you move from early-stage custom pricing toward a scalable model, you will need to choose a pricing structure. Here is a comparison of the most common B2B SaaS pricing models:

How to Iterate Your Pricing as You Grow

As you scale from 20 to 100 customers, you can get way more sophisticated about pricing testing. Shape your V3, V4, and later pricing based on real data.

A simple iteration framework:

1. V1 pricing: custom, negotiated with your first 1-10 customers. Learning mode.
2. V2 pricing: informed by reference customer feedback. Begin standardizing.
3. V3+ pricing: data-driven testing across a growing customer base. Optimize for conversion and revenue.

The most common mistake founders make is trying to nail a perfect pricing model too early. Your first price is not your final price. Give yourself permission to iterate.

If you want to go deeper on early-stage startup strategy, you might find it useful to read about how to get your first customers alongside this pricing framework.

A Note on Negotiation in Early-Stage Enterprise Pricing

Pricing in early days is all negotiation. In your first customer conversation, focus entirely on curiosity before you name any numbers. Get them to tell you how they see the value. Get them to name a number first if you can.

Chris Voss's Never Split the Difference. It is the single best primer on negotiation for founders that I know of.

As you think about the long-term sustainability of your company and your own role as a founder, pricing conversations are also deeply connected to how you think about your company's vision and strategy. Knowing what you are building and for whom will always sharpen your pricing instincts.

Wishing you peace on your journey today.

-Matt

If you are a founder navigating early-stage pricing or fundraising questions, CEO coaching might be worth exploring.