[HN Gopher] Ask HN: How to price your first enterprise customer?
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Ask HN: How to price your first enterprise customer?
We are a small SaaS company with a recently launched product.
Currently we have mostly smaller customers (50+ users is "large"
for us at the moment). We now have, somewhat unexpectedly this
early, the interest of a large enterprise that wants a deal to
onboard 5000+ users. The problem is that we have no idea how to
price this, as we have not yet had time to scale up our pricing
enough to gain the necessary experience. Our current pricing
model, for smaller customers, is a simple, linear $49 per-seat
plan. - How do pricing for enterprise SaaS usually work? - What
kind of volume discounts are they expecting? - Should we offer a
"flat" price for 1-3 year contract, or per-seat model? - How did
you handle your first large-scale customers? We honestly feel a
bit thrown into the deep end here, and we don't want to miss this
opportunity just because we are inexperienced.
Author : secopssaas
Score : 108 points
Date : 2023-07-15 13:56 UTC (9 hours ago)
| gnicholas wrote:
| When I've entered a new tier in terms of customer size, I find it
| helpful to ask my contact "what would be a low-friction price for
| you?". Since we have low costs, this price suggestion (or
| something a little higher) typically works for us. We give them a
| year at this price, and if it seems like we're providing way more
| value than we're being paid for, then we renegotiate in the
| future.
|
| When price is a sticking point, don't forget to consider
| intangibles. We give discounts for customers that gather efficacy
| data and write up a white paper, or who actively publicize our
| partnership. This can be helpful in bridging the gap on value
| (although you need to make sure the marketing or other folks are
| on board, otherwise your contact may make promises that his
| colleagues aren't willing to follow through on).
| jtchang wrote:
| There is some really good advice here. I've been on both sides of
| this: pricing new enterprise service as well as negotiating them.
|
| $49 per seat. Is that per month or per year?
|
| Concretely look at the market and the value you are providing.
| Split up the user count to occasional users and permanent ones.
|
| From the other side of the table I am expecting some type of
| volume discount because I am not spending 250k a year if the tech
| is not core to my business. I'd expect discounts for multi-year
| deals. You need to come in at a price point that makes sense to
| them depending on the market.
| jbs55 wrote:
| The lack of questions around perceived value is interesting to
| me. Try to get yourselves into their shoes. Try to have a chat
| about the problem they are looking to solve. It could be a
| problem that warrants a (much) higher price or not worth your
| time (depending on how much incremental work it creates for you).
| physicsguy wrote:
| Charge 5x more. Enterprise clients are much more demanding.
|
| Do things like create a second tier price, call it enterprise,
| and for SSO and other enterprise focused features only put these
| in the more expensive tier.
| bell-cot wrote:
| - Talk to your tech and customer service people about onboarding
| and supporting another 5000+ users. Does the server load of your
| SaaS _really_ scale linearly with user count? Does your product
| need more customer support when the users are less bright? ( _For
| this purpose_ , large-company employees typically are.) You can
| kill yourself trying to swallow a whale.
|
| - Next, give a very cold, hard business look to this potential
| customer. Large enterprises too-often treat their smaller vendors
| quite poorly. Will they expect you to jump through hoops of fire
| every time they snap their fingers, then pay you on "Net
| Eventually" terms? Maybe learn about their industry's norms in
| treating smaller vendors, too. (At $Job, we got burned badly once
| by an automotive supplier. "Normal" norms of honesty did to
| apply, and we'd delivered product on verbal assurances, without
| full legal paperwork in done advance.)
|
| - Next, talk to some experienced business people about whether an
| "Enterprise Edition" could add _serious_ value to your product,
| or not. As an old manager once told me, "There's no EE of Post-
| it Notes, only a volume discount."
|
| - If that EE-value answer is "no", then your "Enterprise" product
| may be something like "Same price per seat, but at 250+ users
| you're allowed up to 5% overage until your next annual renewal.
| And we're currently working on a few more user-management and
| reporting features for large customers."
|
| - If that EE-value answer is "yes"...then life gets interesting.
| Large customers can be happy to spend $20M to save themselves
| $50M. OTOH, $20M is real money. How wide & deep is your moat?
| fuzzieozzie wrote:
| What is your target market for "making money"? (large or small
| customers). If you expect to make real money on large customers
| then negotiating a special relationship where you actually "get
| in bed" with the large customer to learn their requirements will
| really accelerate your product development focus - ie. give them
| even more of a price break IF they commit resources to help
| direct your product.
|
| The reality is you WILL have problems with this large customer
| and you want to lay the groundwork for a give and take
| relationship where you will both be winners in the long run.
| jot wrote:
| I recently had a similar situation.
|
| Getting someone involved who really understands the enterprise
| buying process was a massive help.
|
| I worked with Alice from https://lookingglasssolutions.com (UK
| based). She was great and gave us much more confidence in our
| responses.
|
| I recommend having a call with her and/or finding someone in your
| part of the world/market that offers similar services.
| com wrote:
| I'm really hoping that Alice is the principal of the business,
| and chose to name it as a hat-tip to her fictional and real
| namesake.
| cloudking wrote:
| You should start higher than your small customer plan. Enterprise
| customers have larger budgets and you will most likely have to
| build enterprise-specific features for this customer and future
| ones. Factor in the cost of developing enterprise feature
| requests (extra security, auditing, reporting, saml/sso etc).
| Calculate a per user rate, but quote them as a single site
| license for their org, give them flexibility to add a certain
| amount of users per year before renegotiating renewals. Also
| starting higher will give you room to negotiate if they push
| back. Good luck
| awicz wrote:
| This!
|
| They will be more work. They do have the budget. They will
| negotiate, hard.
|
| Think of your highest price, then add 15%. It will be ok.
|
| If they don't buy, it wasn't because of price if you've already
| made it this far.
| zer8k wrote:
| I've never sold an enterprise SaaS but have procured them.
| Rarely, if ever, is it a simple pricing situation. A big thing
| for me is always SLAs. We will pay more if we can get a good SLA
| and a guarantee that your end will take care of problems quickly
| and with priority. We have also dropped/sued companies who failed
| to meet their SLAs (though legal action has only been taken once
| in my career). There's also a "serious business" price point to
| consider. It's often easier to raise your price than give
| discounts to enterprise clients. There's perceived value in
| simply paying more.
|
| Work out exactly what they want. Ask if they want guarantees,
| what those guarantees are, and how you can service them. I doubt
| you'd be able to meet a strict SLA at $49/seat. Imagine you have
| what amounts to a small outage that puts them out of work for a
| day. Total up that labor cost and ask yourself how much you'd
| want to make to insure you can service that problem. Price
| accordingly. Since, of course, if they wanted your normal pricing
| they'd just procure a bunch of seats the usual way. There is a
| reason that most enterprise contracts are long and worth XX-XXX
| million dollars.
| futhey wrote:
| I've done a few of these. Basically, you need to quote them
| significantly more than you're currently comfortable asking,
| because it's basically going to suck up months of your time and
| you're going to have to re-tool your business to meet their
| requirements. Let's say $10k-$20k, assuming from your numbers
| they're 100x the size of a typical customer.
|
| Quote them such a large amount that you expect them to say no,
| and then make your peace with them saying no. Don't accept a
| significant discount on what you quote them. Instead, let them
| go, and wait for another enterprise customer to come along.
|
| Do a call to understand why they want to buy your product ("I
| wanted to know what you were having trouble with and how you
| think our product could help") and come up with requirements up
| front. Charge extra for things like enterprise sign-on if they
| haven't been built yet.
|
| This customer could make or break your business. If you quote is
| too low you risk regretting the deal not only on your end, but
| the potential that your enterprise customer backs out as well
| when you inevitably hit some stumbling blocks.
|
| Your first enterprise customer is like winning the lottery - it's
| okay to play, but don't bet everything on winning. Expect to
| lose, and set yourself up for a big payoff if you end up making
| it work. Plan to learn from your mistakes either way.
| inparen wrote:
| If X is cost/per user, Y is your profit margin, X+Y is usually
| offered.
|
| But for 5000+ users, profit will be like Z = 5000+ * Y.
|
| So question can be how much of Z, you can let go (assuming you
| want to market to future customers, using this account as
| reference/example).
|
| Question is, are they actually going to onboard all 5000+ ? You
| don't want to run in losses, if you offer rates, below your
| operational cost. May be ask them to do pilot run with subset of
| user with same rate, how much pain they will cause? Then, you can
| decide accordingly.
|
| That sound risky, but hey, that is what business is all about.
| risk/reward ratio? I am afraid, there is no definite answer.
|
| Whatever is the domain/industry, do you have some baseline
| pricing to compete against ?
| moneywoes wrote:
| What is your sales process? Is it turn key, does it require a
| white glove approach
| mannyv wrote:
| You will have to include extra costs. They will probably require
| a dedicated support team, or at least a TAM (technical account
| manager) and an account executive. 24x7 might be required,
| depending on their time zones/locations.
|
| What about training?
|
| You will also need to manage the rollout, or at least assist with
| the rollout.
|
| Do they need SSO? What integrations do they need? If they're
| replacing n things that's a lot of integrations. You'll need to
| understand the integrations and what it'll take to do them. The
| customer will need to prioritize them for you, and get you access
| to the systems you need. Those are extra cost.
|
| When you price enterprise you need to charge for 24x7 support, or
| at least for priority support. And don't forget your margins.
| Don't discount too much, and never discount maintenance.
|
| There's a lot more i could say, but i have to go to ikea right
| now. Good luck!
| theptip wrote:
| Calling out SSO is a really good point. If your product doesn't
| support SAML, will you need to build it? Who is their vendor
| for their auth system? Okta or something funky? Expect to do
| professional services work for each new SSO customer you win.
|
| It's annoying but enterprise seats tend to cost more because
| enterprise SAML integrations often end up being super painful.
| pharaohgeek wrote:
| 100% true! If you don't support SAML (and occasionally OIDC)
| then you're not an enterprise product. Period. It is
| practically mandatory these days. Additionally, if your
| product has any provisioning requirements you may need to
| support SCIM for automated provisioning, too.
| gizmo wrote:
| Enterprise customers are a double-edged sword. They have money
| and they're very professional. That's the good part. The bad part
| is that they can pull your product in a direction that will kill
| your startup.
|
| SaaS software -- with very few exceptions -- can be made either
| for SMB or for enterprise customers. Very rarely you can keep
| both happy. For SMB you need a funnel and volume, for enterprise
| you need sales and handholding. For SMB you need to optimize
| onboarding for Enterprise it's about integrations and
| certifications and audits.
|
| Do you have a strategy and a desire to serve many enterprise
| customers? If not, this enterprise customer will just be a giant
| distraction and not worth the headache. Your SMB customers won't
| care about the enterprise features you develop. And likewise, you
| won't attract many enterprise customers with the kind of casual
| and friendly website that appeals to smaller businesses. Your
| vocabulary will need to expand to include words like "webinar"
| and "turn-key solution" and "Soc2 compliant". And some
| enterprises need 6 or 9 months to figure out if they actually
| want your product and are ready to sign that check. Enterprise
| sales requires stamina.
|
| When an enterprise customer approaches you they're asking you to
| throw away your existing business model and to serve them
| instead. Is that what you want? Do you realize that's what's
| going on here? Do you know how to get the next 10 enterprise
| customers? If yes, go for it and charge at least 5000x the
| single-seat cost. If your typical customer is 50 users, then you
| want to charge about 1.5 * (5000/50) = 150x what you charge your
| typical 50 seat customer. Then maybe offer them a discount from
| that headline price if you think that's appropriate. But I would
| try to anchor them on higher per-seat costs for an enterprise
| license.
|
| But then again, what you charge this customer is pretty
| insignificant compared to the real question: do you want to throw
| away your business model and become enterprise SaaS?
| seizethecheese wrote:
| Great comment, obviously informed by experience.
|
| However, they recently launched this product, and this new
| client will be worth $3mm in ARR. Unless the SMB biz is seeing
| great early traction too, it would seem crazy to even consider
| not jumping at the enterprise opportunity.
|
| This also depends on how many similar enterprises there are, of
| course.
| danpalmer wrote:
| Hey, nothing to add to the pricing advice, but do be aware that
| having one big customer paying a lot of money could well change
| your product/engineering culture, or even the company culture.
|
| Imagine having that customer and then them saying they're
| considering dropping you in a year if you don't have a particular
| feature that's not on your roadmap (or maybe not even that
| related to your product in your opinion). Do you drop everything
| to please them, or do you stick to your plan? How much pain do
| you endure to keep the one big customer happy?
|
| I've seen close friends work in companies with 2-5 large
| customers, and the team regularly endured significant pain to
| keep one of them happy because it would be business-changing to
| lose one.
|
| Unless you are very intentional about how you handle this sort of
| thing, it'll be bad by default. Don't take this as
| discouragement, but do make sure you really know this in advance.
| dchuk wrote:
| Study Crossing the Chasm, this is the exact challenge of doing
| startups focused on enterprise and that book is fantastic for
| understanding how to navigate it.
| StayTrue wrote:
| Seen this too. Sometimes companies think of themselves (or
| aspire to be) product companies but are really service
| providers. Not that there's anything wrong with one or the
| other the same strategies don't necessarily work for both.
| roarcher wrote:
| Absolutely, I've gone through this at most of my past employers
| and am currently experiencing it. We've always had a very
| careful engineering culture, taking the time to thoroughly plan
| and future proof features, and it's been great. But now we've
| got a big industry name waving a blank check in our face and
| we're suddenly rushing features to win their business. Our
| architecture is becoming brittle and we're spending as much
| time fixing defects in the new features as building them.
|
| We're a startup and I get why management sees this opportunity
| as our big break, but I have to wonder if it'll be worth it in
| the long term. Sucks to watch the best codebase you've ever
| worked on devolve into the standard enterprise ball of mud in
| real time.
| RA_Fisher wrote:
| A multi-year contract could mitigate that risk.
| rollcat wrote:
| > Unless you are very intentional about how you handle this
| sort of thing, it'll be bad by default.
|
| I don't think it's necessarily bad by default. Any single
| customer (large or not) is going to be clearer with their
| requirements, than trying to distill something that can fit
| several other customers' problems. It tends to put firmer
| constraints on your design, brings more clarity to your
| direction. It also depends on what you're comfortable with -
| personally I prefer to focus on solving the technical
| challenges, so I find that constraints on product direction
| leave me with more brain cycles to tackle the tiny details.
| Once I have a well-engineered solution, it tends to generalise
| more easily.
| DoreenMichele wrote:
| _I don 't think it's necessarily bad by default._
|
| Everything I've read indicates that _bad by default_ is the
| way to bet.
|
| Small companies routinely think one big customer will have
| them set for life. They will have it made in the shade.
|
| It seems to be the small business version of the "winning the
| lottery" fantasy.
|
| And most of the time, you become their bitch. They make
| demands, you have no real choice but to meet them because
| it's such a big chunk of your revenue that you can no longer
| make payroll without them.
|
| Rule of thumb: Don't let one client be more than 20 percent
| of your income if you want to actually remain an independent
| business and not get pwned by these people.
|
| They are unlikely to worry about your welfare and you can get
| into financial hot water if they come up short financially
| and decide to stiff you.
|
| They likely have a legal department or lawyer on retainer who
| has told them just how much they can legally shaft you and it
| can threaten to put you out of business.
|
| Sometimes small businesses who survived such incidents change
| their stated policies in defense after nearly going under.
| akiselev wrote:
| _> Everything I 've read indicates that bad by default is
| the way to bet._
|
| Agreed. Once the customer realizes that they make up the
| vast majority of the vendor's revenue, 99% of customers
| will press that leverage for everything it's worth. They'd
| be irresponsible not to!
|
| They might not be too demanding or screw the vendor over
| right away, but when push comes to shove they will pull
| that ripcord faster than you can say "Net 30".
|
| Here's the double whammy: chances are that the customer's
| success will be correlated to the rest of the economy, so
| when the vendor really needs the money is exactly when the
| customer will stiff them.
|
| The only exception is government, but that's a different
| class of sales.
| rollcat wrote:
| > They make demands, you have no real choice but to meet
| them because it's such a big chunk of your revenue that you
| can no longer make payroll without them.
|
| Would you have been better off never having had that money
| in the first place?
| DoreenMichele wrote:
| Possibly. You could have made money from other clients
| who weren't going to do that to you.
|
| There are only 24 hours in the day. Time spent serving
| them is time not spent on other clients.
|
| One piece of advice I've seen: Diversify your client base
| if you are seeing too much of your income from one or a
| few clients.
| wouldbecouldbe wrote:
| You describe being a freelancer (or some of US folk call
| contractor).
|
| It's a pretty good & comfortable life ;)
| moneywoes wrote:
| > Rule of thumb: Don't let one client be more than 20
| percent of your income if you want to actually remain an
| independent business and not get pwned by these people.
|
| I agree in principle but how does this work in practice?
|
| Keep rejecting clients until they are right sized?
| jll29 wrote:
| I've seen a startup in the Netherlands that never made it
| beyond mega-client #1. They are still doing well, but basically
| they have become a service provider for what was their first
| bigger customer and, years later, is now their only one.
|
| This is in line what others here are warning, but the way I
| would deal with it is specify a price where either it is
| similar to the single-seat price with no longer term
| obligations OR a much reduced price with a very long contract
| duration (so they can either make you so rich that you don't
| need them or they can save money but then they cannot threaten
| to leave you as a means to elbow you into building off-roadmap
| bespoke features that only they need). Note that this is theory
| ;-) I have not been in that situation myself.
| lmeyerov wrote:
| The enterprise wants the deal to be successful and your business
| sustainable.
|
| They probably also want it to grow with locked-in pricing for
| deal term for that - predictable, safe, etc.
|
| They'll need a lot of integration & ongoing support, comfort of
| 24/7, and that you have enough profit that it's good, not
| destructive. Imagine how many people hours / week they'd expect -
| maybe even 1-2 employees worth.
|
| I can imagine say 150k base pricing and then 2-4x / user your
| normal SMB pricing for some base tier of user count. As they do
| higher user counts, price per user goes down for new accounts.
|
| Also, you can charge an extra 10-20% for platinum support, and
| variable number of additional professional services hours. They
| may even want to pay for a dedicated person at some % time (half,
| 2x, ...). You don't want that to be _you_ though.
| presidentender wrote:
| My company (heystage.com) provides flexible pricing
| infrastructure to allow you to easily change your mind if you get
| this wrong the first time. I'd love to hear your thoughts and see
| how your changes work out for you!
| softwaredoug wrote:
| Discounts? I'd go the opposite direction...
|
| Expect pain.
|
| Enterprise sales means annoying security questionaries, contract
| negotiations, and lots of hands-on conversations. If anything the
| acquisition cost is very high and there's a reason the enterprise
| pricing is not listed online anywhere for many companies.
| samsolomon wrote:
| This is why companies that sell enterprise saas have separate
| support contracts. That or they have affiliate consultancies
| that offer support.
| woleium wrote:
| So charge a flat fee and a rate card to deal with all the extra
| stuff. Enterprises are used to purchasing service along with a
| product
| ttul wrote:
| Sure there is pain, but 5,000 seats all at once is usually
| worth it. The thing to avoid like the plague is RFPs. They will
| kill your startup faster than anything. Your customers should
| be early adopters and early markets do not do RFPs.
| moneywoes wrote:
| Can you elaborate on this please?
|
| Why it a death sentence to sell to organizations with RFPS
|
| Is it cause of other people putting bids? What if I want to
| sell to government agencies as a bootstrapped business
|
| Thanks so much
| gnicholas wrote:
| IME it's because you end up spending tons of time on the
| proposal, with no guarantee of revenue. And then you're in
| their process, and they'll have their procurement folks
| hammer you on price. They'll know that after investing all
| that time in the RFP process, you won't want to give up on
| the revenue, and they'll take advantage of that.
|
| Big picture: it just frames things the wrong way -- if they
| want to buy from you, then they're buying from YOU. If you
| get pulled into an RFP, then you're selling to THEM.
|
| That doesn't mean RFPs are always bad, just that they can
| be terrible for startups that are too small, and not
| prepared for the process.
| Atlas22 wrote:
| Have sold to a lot of governments and large contractors. I
| wouldn't say its a death sentence, just different business
| model than most startups. Government and large orgs that
| send out RFPs are essentially asking for a product/service
| to be made and maintained specifically for them. Unless
| your essentially in the consulting business, its rarely
| worthwhile for a normal startup as it eats A LOT of time
| for a single customer. Government can be very lucrative if
| you can find the right niche but its always exceedingly
| painful and one of the governments favorite pastimes is
| completely 180ing requirements right after you complete
| them.
| gervwyk wrote:
| Problem here to not underestimate is that if you are not
| experienced in RFPs you will spend 10x to 20x the time
| than someone that has experience int these processes, and
| then there is a real risk that you optimistically
| misinterpreted some qualification criteria that
| disqualifies you in the process. So if you have done this
| before, do it. If have to do it for the first time, you
| want to consult someone who has walked the path.
| ezekg wrote:
| This. You'll want to charge at least $1k/mo for enterprise.
| They take a lot of back and forth. Mostly due to security and
| compliance questionnaires. But once it's done, it's generally
| gravy. Always do Net30 or Net45.
|
| Peek my company's pricing if you want to see how I've priced
| things. It's worked well for me. Link in bio.
| snowwrestler wrote:
| I don't understand this comment. $49/seat for 5,000 seats is
| $245,000. That's a lot more than the "$1k/mo" you're
| suggesting.
| ezekg wrote:
| I misread the OP. I thought it was $49/mo, not $49/mo/user.
| ToJans wrote:
| I've made enterprise-size proposals while working as a consultant
| for a large service providers, but I've also made proposals with
| my own tiny SaaS for public companies.
|
| Whenever I'm in the second situation, I partner up with a large
| service provider that I really trust, and they cover most of the
| typical (non-functional) enterprise requirements, and also handle
| things like integration etc (my SaaS uses simple webhooks &
| restful APIs, and they create & maintain an intermediate anti-
| corruption layer etc).
|
| I realize I'm giving away a piece of the cake, but for me it's
| the most efficient way to get access to these enterprise level
| customers while avoiding most of the hassle...
|
| This might also be highly dependent on the type of system you're
| offering. I offer a system of engagement, but I can imagine a
| system of record or a system of report require another approach.
| ToJans wrote:
| Oh, and for the price: I prefer a fixed yearly license price
| with different modules as add-ons, and use the same price for
| both enterprise and SMB clients, as long as the usage is within
| reason. Per location also works...
|
| The major difference is that I multiply my implementation
| effort by 3 for the enterprise clients. (Which is quite
| realistic in my experience.)
| wallrat wrote:
| The best kind of "problem" to have. Expect to build features,
| integrations and other customizations, and factor in the costs.
| You can do that with a higher "base" price, or include
| professional services into the contract (but be careful with IP
| rights). Use a per-seat model internally (more users = more
| support etc) and offer fixed price point per year. Expect to them
| to want to negotiate a large discount on the "list" price, so
| start higher than you might think.
| weird-eye-issue wrote:
| > The best kind of "problem" to have
|
| Optimistically yes but unfortunately this often results in a
| lot of wasted time
| FlyingAvatar wrote:
| Before you can give a price, you need to talk about their
| expectations.
|
| What's the SLA? Is it business hours in certain time zones?
| 24/7/365? Simply being able to provide that support is a cost you
| will need to factor in.
|
| Will you need to provide SSO capability? Finer grained access
| control? If you expect to sign up additional enterprise
| customers, it might be worth eating the cost of this, but if not,
| you might want to account for it.
| sf4lifer wrote:
| Sounds promising. But be skeptical. Large companies will rarely
| risk trying something new with 5000 people. $5000 * $50 * 12 =
| $3M. This level of spend (on anything) will require c-level
| executive approval. Typically for a large enterprise anything
| over $250K / year needs to be negotiated with a procurement
| officer who will create an RFP process with your competitors to
| ensure the corp gets the best deal. These are professional
| software price negotiators, they know all the tricks.
|
| You should ask your customer champion what the value of your
| solution is to them. If they can't explain to you the tangible
| value/ROI, they won't be able to sell it internally.
| secopssaas wrote:
| Our understanding is that they expect to replace a few existing
| tools with ours, so there should be an existing budget, at
| least partially.
|
| We are currently meeting with execs on the VP level, but it's
| still early in the relationship. They are quite aggressive on
| receiving at least a indicator on price.
| sf4lifer wrote:
| Ok. In that case, I'd position a paid pilot for 100 users to
| prove out the value/ROI at some rate that's less than the
| cost of the existing tools. This should be within VP
| discretion and won't trigger a procurement process. Once the
| ROI is clear, then you can negotiate a larger deal. Rolling
| any software out for 5K people especially if it includes
| replacing tools is a large undertaking for a company.
|
| You should expect it to take at least a year. There are other
| contracts they will have to get out of. There is data in
| those systems that will need to be dealt with.
| ttul wrote:
| If they are asking about price early in the discussions, it
| can be a buying signal. It indicates that someone there
| intends to buy and needs to know what kinds of haggling
| they'll have to do internally to get it approved.
|
| Enterprises are just a collection of people with their own
| personal interests. You are selling to those people, not the
| enterprise. Find out what the stakeholders need and address
| those needs one by one.
|
| For instance, you probably have a technical buyer who may
| have been your first contact. Make sure you find out what
| they need now and what they will need in the next few years.
| Try to sketch out a road map that will make them
| exceptionally happy.
|
| There is always a financial buyer as well - likely that
| person's boss. Find out what financial objectives they are
| trying to meet buy replacing the other tools with yours.
|
| At the end of the day, a deal is done when the people who
| need to sign off on it are all adequately satisfied. You can
| definitely do this and when you crack the code, it's
| extremely rewarding. Good luck!
| adameasterling wrote:
| Perspective from a CTO at a small b2b saas startup:
|
| Pricing is incredibly tough, and at my startup, we've had tons of
| hours-long conversations on pricing internally, with consultants,
| etc.
|
| We also have a mix of customers, both very large companies with
| thousands of employees and very small ones as well. My answer is
| a little complicated because we have two products right now, with
| very different approaches to pricing.
|
| For our first product, it worked really well to charge by the
| number of physical locations at the business. (We tried usage-
| based pricing, but it was too confusing for what that product
| was; and also incentivized less engagement.) The price per
| location is fairly high, but we do tend to discount down for
| larger deals.
|
| For our second product, pricing has been very tough. For very
| large customers, we've carved out special deals, where they get
| billed a flat monthly negotiated amount for unlimited service.
| These have been a little annoying to set up, but pretty
| profitable for us. For all other customers, we charge by usage.
|
| Also, I see some people saying bringing on an enterprise client
| is a way to kill your startup. I'm skeptical of this. Large
| businesses, in my experience, are very pleasant to work with,
| have a lot of money to spend, and, yes, are demanding, but in
| ways that make your product better, not worse. It's true that
| you're going to have more fire drills for your engineering staff
| (last-minute demands to add an important feature), but this isn't
| a bad thing. Security questionnaires are probably the most
| annoying thing to deal with, but it's solvable (talk to Vanta).
|
| Feel free to hit me on Discord or send me an email; happy to say
| more.
| ttul wrote:
| Your journey will be unique, so take everyone's advice with a
| grain of salt. However, here is one thing I have learned about
| pricing after two decades of recurring revenue software and
| services: you can ALWAYS raise your price.
|
| Many people will tell you that your price cannot be raised. That
| is utter BS. For the first enterprise customer, I suggest giving
| them a price they can't refuse; something that will cover your
| bases providing a healthy gross margin (something like 70-80%
| after paying your hosting costs, support costs, and other direct
| selling expenses). But don't make a "meal train" out of them yet.
|
| Once you get their logo on your sales slide deck, it will be far
| easier to close enterprise deal #2. And once you reach perhaps
| ten enterprise customers, all of whom are extremely happy, then
| you can announce to the initial group that you intend to raise
| your price "a year from now". For new customers, the price is
| already raised.
|
| Keep doing this a batch at a time, but don't let the price get
| too far behind. It is far more difficult to raise ancient
| customer prices by 50% all at once vs. a steady 5-10% per year
| all the way along. So long as you are continuing to provide good
| value, customers will stick with you.
| themodelplumber wrote:
| > So long as you are continuing to provide good value,
| customers will stick with you.
|
| Just to add: Provide value or provide context along with value.
|
| For example, "our partners and providers continue to raise
| prices due to economic factors" is contextually a totally
| acceptable point to make.
|
| For example, if an upstream infra provider goes "our
| electricity bill is nuts, welcome to your new pricing tier" but
| changing that provider would cost your customers even more.
|
| A lot of people also don't understand their value proposition
| in a non-technical way, which is really important as well. Once
| you can understand it better on your client's side, the context
| is generally even more clear..."you've helped us identify and
| solidify plans to upgrade our platform to better suit your need
| to X and Y within your organization."
| devjab wrote:
| Having been the enterprise customer for two decades I've never
| worked in a place where this wouldn't have been a sure way to
| lose our business. In fact, Microsoft is in the process of
| losing us right now because of their continual Azure increases.
|
| The reason may not be what you expect. It's not that we're
| angry with Microsoft for raising their Azure prices. It's
| because they've raised them so high that the competition is
| getting to the point where the business case for spending the
| next 10 years on our own iron (renting space at facilities that
| sell that sort of thing) is turning green. The only way you can
| continue to increase prices 5-10% a year is if you have a
| monopoly on what you sell. Eventually it's going to cross into
| an area where not only the annual licensing but also the
| migration will be cheaper at your competition.
| formercoder wrote:
| In your cost comparison are you including headcount to
| maintain all of that infrastructure? Security? And the
| equivalent of multi zone redundancy? Scale headroom?
| devjab wrote:
| Yes. Before Azure/AWS became the "obvious" choice for a lot
| of European non-tech enterprise many organisations had
| already moved to the cloud of sorts. Basically there are
| companies that house servers, and you rent a place to put
| your hardware. They'll maintain it and do support on it and
| really it's basically renting with more steps. They have
| zone redundancy, though not global, but that's rarely
| needed. Or in short, they tend to handle all the physical
| parts of having hardware.
|
| When Azure blew up it did so because it was cheaper, much
| cheaper, not so much because of the features it offered.
| They are nice, but for a lot of industries you sort of
| can't use them because it's a bureaucratic nightmare to
| upkeep the required exit plans if you do too much vendor
| lock-in. For some industries this isn't an issue, but for
| many EU enterprise organisations it is. So anyway, the big
| cloud was cheaper, but since it's been raising cost pretty
| steadily, and, because all those hardware houses lost
| customers and the survivors became cheaper, the scale has
| now tipped.
|
| As far as operations go on the software side, I'm not sure
| the headcount is that different. We frankly tend to buy
| that from third party companies anyway, but the pricing
| difference isn't too different between whatever you want to
| do. I'm personally a fan of doing it with your own staff,
| but it's just such a challenge because your IT budget isn't
| going to be big enough to do in a way that is resistant to
| people finding new jobs. The third party agencies don't
| have this issue because they sell things like networking to
| a bunch of organisations, so it's not just one or two guys
| for them like it would be if we did it ourselves.
|
| But yeah. Big cloud operational costs are getting to where
| it makes absolutely no sense to use them, all costs
| included. When we draw up plans for hardware we have extra
| budget for when some net controller fails 5 years before
| it's supposed to, that sort of detail. Otherwise you can't
| make an informed decision. Judging by the local tech
| environment here in Denmark, we're frankly even going to be
| late to the party of leaving big cloud because of costs.
| Likely because we weren't using it too heavily in the first
| place.
|
| I fully expect that the pendulum is eventually going up
| swing back. It's not like we're stopping our contracts on
| Office365 or Windows licenses anytime soon, and eventually
| we're going to get offered the same sweet package deals
| that landed us in Azure and not in AWS to begin with. But
| for the next 5-10 years I think a lot of EU based non-tech
| orgs are going to leave big cloud over cost.
| moneywoes wrote:
| Have they been increasing value along with that?
| devjab wrote:
| I can point to very few IT systems that are actually
| increasing our value. They are necessary because it's hard
| to run a 300 employee investment bank using just excel and
| outlook, so they sort of are. If you look at the per
| employee performance, however, it is down compared to when
| the organisation was just using excel and outlook. This is
| despite getting a lot of neat systems that work well, but
| they obviously don't work well enough. Which is probably
| combination of the implementation among employees, the lack
| of custom fits, the lack of integration between different
| systems and of course some of the systems themselves.
|
| As far as where we run things, well, no. Things aren't
| better in azure than they were 20 years ago when it was run
| on a server in the basement. It's not even cheaper per
| usage. But a lot of this comes to how you buy these things
| in enterprise. Our biggest expense is never going to be
| anything but the windows licensing, the rest is sort of
| just added on. Right now Azure is getting too expensive to
| compete, so we're likely going to leave, but it's not like
| it really matters for the organisation beyond the budget.
| We could run things on raspberry pies tied to a racoon
| who'd power them from the movement it makes while it
| attacks random people in the IT department and the
| organisation wouldn't care as long as it worked and was
| cheaper than it's competition.
| snowwrestler wrote:
| The general form of this is "don't let your pricing become
| uncompetitive."
|
| For basic server capacity, leasing or buying your own
| hardware is a competitor.
|
| But for software higher in the stack, like collaboration or
| marketing platforms, there's often no "on-prem" option. So a
| SaaS business just needs to stay close enough in price to
| competitors that the pain of staying is less than the pain of
| migrating.
|
| If all your competitors are raising prices... well, so can
| you. (And vice versa.)
| victor106 wrote:
| 100% agree with this.
|
| Azure price increases are ridiculous.
|
| And Azure is not even the best cloud service provider
| compared with AWS and GCP. Azure documentation is horrendous
| and performance is subpar. Although I do think their storage
| is slightly cheaper than other the other two. But I think
| they might still win compared to GCP as they are pretty
| strong in enterprise sales. I keep hearing good things about
| Oracle cloud too but haven't tried it yet.
| theptip wrote:
| I think you are missing the first half of the GP's advice -
| they said "give them a price they can't refuse", ie price
| below market/competitive level. The 5-10% per year is getting
| you back up to the "market price".
|
| The reason this is useful advice is that, as the GP notes,
| many think they will be locked in to selling below-market
| forever if they give their first customer a good deal.
|
| This really does not apply to MS. They do not price anything
| below market rate, in some sense they set the market rate.
| (Or get to charge a monopoly/lock-in premium above it).
| thedougd wrote:
| Be prepared to spend a little money on a contracts lawyer and to
| purchase some insurance to cover your terms of liability in the
| contract.
|
| Depending on the nature of your product you may need to bring in
| an auditor to help establish compliance to a framework like SOC2.
|
| Enterprise customers are use to spending more, however huge
| budgets isn't a guarantee. Price to the value they perceive and
| avoid creating disincentives for them to expand the use of your
| product. For example cliff pricing my user base (200-400 users is
| $X) will drive them to avoid adding the 201st user.
| poniko wrote:
| Id just go with a 5000*49 give them 30-40% volume discount and
| add something ontop for lerning, support and certification.
|
| If that's too much then add more discount or make part of the
| leaning included, just keep the original price the same for
| everyone if that is what you feel the product is worth.
|
| Long answer .. is an hour discussion.
| gnicholas wrote:
| Good point: training is good not just for boosting the price,
| but also to ensure that people get onboarded properly, which is
| important for customer success/retention.
| simpsond wrote:
| Consider giving a discount only on time commitment. The time
| burden with enterprise customers is heavy up front. Legal,
| accounting, compliance, etc. They will often prefer a commitment
| as well.
| ensemblehq wrote:
| I'm a tech consultant, former VP at an enterprise, former
| entrepreneur and regularly deal with vendors. General advice is
| to always lead with a flexible plan (per-seat), throw in more for
| account executives, level of support, onboarding and etc. Price
| as high as you can and negotiate. Also use this as an opportunity
| to potentially land and expand - enterprises are typically made
| up of multiple business units under a single brand. Be wary of
| effort to get past security and procurement as well.
|
| With enterprises, pricing depends on many factors including your
| product, integration, adoption, support, training, alternatives,
| etc.
|
| I've advised and signed off deals ranging from $40k to $2m in
| annual contract value. It all depends on product and the value it
| delivers to the company (and the enterprise - I.e. other teams)
|
| If you'd like to have a chat further, happy to share my
| experiences in greater detail if you can share more.
| HeavyStorm wrote:
| I'm just an engineer, so I doubt I can really contribute, but a
| manager I've worked with once told me:
|
| The price of anything is as much as you can have the customer pay
| you.
|
| Meaning, in your case, as much as you think you can charge
| without having they quit the deal.
| devmor wrote:
| Don't underestimate your support cost. Enterprise customers come
| with enterprise level issues.
|
| It's often a good idea to have a separate support fee line item -
| and your customer will appreciate if it comes with an SLA they
| can rely on you to provide.
| dsmithatx wrote:
| As someone who has been an enterprise customer this depends on a
| lot of factors. First being who your competitors are and how
| their pricing is structured. At work we are evaluating three
| products and the one that has a yearly fee will win because the
| other two charge based on usage. I would definitely tend to start
| with a yearly model until you have lots of customers.
|
| One thing to consider is, can you put their logo on the front of
| your website? Some companies I've worked for do not allow this
| while others will endorse your product. Be sure to think about
| the overall value of the customer and how you can leverage having
| them, but don't make your business depend on their contract.
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