Why Most SaaS Founders Undercharge (And How to Fix It)

You’re probably charging too little.

I don’t know your product. I don’t know your market. But statistically, most SaaS founders undercharge. I did too, for years.

Here’s why underpricing happens and how to fix it.

The Underpricing Epidemic

This isn’t speculation. It’s a consistent pattern.

What the data shows:

SaaS pricing consultants report that most of their clients could immediately raise prices 20-30% with minimal churn impact. Many could double prices.

The gap between what founders charge and what customers would pay is consistently large.

Why it matters:

Revenue is the easiest lever for most businesses. Increasing prices 20% is equivalent to growing customer count 20%—but without the acquisition costs. Understanding key SaaS metrics helps quantify these decisions.

Underpricing means leaving money on the table while working harder than necessary.

Why Founders Underprice

The psychology is predictable.

Fear of rejection:

High prices might get rejected. Low prices feel safe. You’ll get customers, even if they’re not paying much.

This fear is usually overblown. Price objections happen at any price point. The customers who would reject reasonable prices often aren’t good customers anyway.

Imposter syndrome:

You don’t feel like your product is worth much. It has bugs. It’s missing features. Competitors seem better.

But customers don’t see your bugs. They see their problem solved. Value is about outcomes, not perfection.

Competition anchoring:

Competitors charge $19/month. You charge $19/month. This feels safe but ignores differentiation.

If your product solves problems differently or better, competitor pricing is irrelevant. You’re not the same product.

Early customer dependency:

Your first customers got a good deal. Raising prices feels like betraying them. You stay anchored to those early rates.

First customers should get loyalty pricing. New customers are a different market. Don’t confuse the two.

Cost-plus thinking:

Your costs are low. Charging multiples of cost feels greedy. But customers don’t care about your costs. They care about value received.

A solution that saves 10 hours per week is valuable regardless of whether it cost $1,000 or $100,000 to build.

Accessibility idealism:

You want everyone to afford your product. This is noble but impractical. Different segments have different willingness to pay. One price can’t serve all.

The True Cost of Underpricing

Low prices create problems beyond lost revenue.

Wrong customers:

Price-sensitive customers are often the worst customers. They demand the most support, complain the loudest, and churn the fastest.

When you raise prices, you lose these customers first. That’s feature, not bug.

Credibility questions:

In many markets, low prices signal low quality. “Why is this so cheap?” raises suspicion.

Premium prices attract premium customers who expect premium value. This is often easier to deliver than racing to the bottom. Strong customer success programs help justify premium pricing.

Sustainability pressure:

Low prices require high volume. High volume requires more infrastructure, more support, more everything.

The business model that works at $200/month with 100 customers breaks at $20/month with 1,000 customers even though revenue is the same.

Investment constraints:

Low margins mean less money for product development, marketing, and talent. The business stays stuck.

Premium pricing creates resources for premium investment.

How to Price Better

Moving from underpricing to proper pricing requires deliberate steps.

Understand value created:

What outcome does your product enable? Quantify it. If you save 5 hours per week at $50/hour, that’s $1,000/month in value. Charging $100/month captures 10% of value created.

Price relative to value, not cost.

Study willingness to pay:

Ask customers what they’d expect to pay before revealing pricing. Ask what would be too cheap (suspicious) and too expensive (out of reach).

This research consistently shows higher tolerance than founders expect.

Test higher prices:

For new customers, try higher prices. If conversion rates stay similar, you were underpriced.

Many founders discover they can double prices with minimal impact on conversion.

Segment your market:

Different customers have different willingness to pay. A solo freelancer and an enterprise team shouldn’t pay the same price.

Create tiers that capture value from each segment appropriately.

Add a premium tier:

If your highest tier sells consistently, you’re leaving money on the table. Add something above it.

Premium tiers also anchor perception. Your mid-tier looks reasonable next to the premium option.

The Pricing Raise Conversation

Raising prices on existing customers feels scary. Here’s how to handle it.

Grandfather strategically:

Keep existing customers at old rates for a period. This rewards loyalty while allowing new pricing to establish.

Eventually, even grandfathered customers should transition to sustainable rates.

Communicate value:

Price increases with product improvements feel fair. “We’ve added X, Y, Z and are adjusting pricing accordingly.” Communicating changes through email marketing helps manage customer expectations.

Increases without visible improvements feel extractive.

Provide notice:

Give 30-90 days notice before increases take effect. Allow planning time.

Sudden increases damage trust, even if the new price is reasonable.

Accept some churn:

Some customers will leave. This is okay. Often the customers who leave are the ones you’re better off without.

Price-sensitive churners are replaced by customers who value what you offer.

Overcoming Psychological Barriers

The mental blocks are real. Here’s how to work through them.

Reframe rejection:

A “no” at higher prices isn’t failure. It’s market segmentation. You’re identifying who isn’t your customer.

You can’t serve everyone. You shouldn’t try.

Focus on value delivered:

When you feel imposter syndrome, think about customers who genuinely benefit. Their success justifies your price.

Not your effort. Not your costs. Customer outcomes.

Compare to alternatives:

Your customer’s alternative isn’t your competitor. It’s the combination of other solutions, manual processes, and unsolved problems.

What does the problem cost if unsolved? That’s your value ceiling.

Practice saying higher prices:

Literally say your new prices out loud until they feel natural. The awkwardness is just unfamiliarity.

“Our pricing starts at $500/month” should feel as natural as stating any other fact.

Pricing Strategies That Work

Specific tactics for different situations.

Value-based pricing:

Tie price to outcomes. Usage-based pricing works when value scales with usage. Outcome-based pricing works when you can measure success.

The customer wins when value exceeds price. You win when price exceeds cost. Find overlap.

Tiered pricing:

Three tiers is standard. Basic, Pro, Enterprise. Each tier should capture a different segment’s willingness to pay.

The middle tier often gets 60%+ of customers. Price and feature it accordingly. Your SaaS marketing strategy should highlight the middle tier’s value proposition.

Annual incentives:

Annual plans paid upfront reduce churn and improve cash flow. Offer 15-20% discount for annual commitment.

The discount is worth the certainty and cash flow improvement.

Price anchoring:

Display higher-priced options first. The expensive option makes moderate options look reasonable.

Enterprise tier at $500/month makes $100/month look accessible.

Removal of low tiers:

Sometimes the best pricing move is removing your cheapest tier. This eliminates your worst customers and positions the product as premium.

Scary but often effective.

When Low Prices Make Sense

Not all low pricing is wrong. Strategic low pricing has a place.

Land and expand:

Low initial price to get inside organizations, then expand to more seats or premium features.

This only works if expansion actually happens. Track whether land and expand is real or just “land.” Cohort analysis reveals expansion patterns over time.

Market penetration:

In winner-take-all markets, capturing market share quickly matters more than revenue per user.

This is VC-funded strategy. Bootstrappers rarely have the runway for pure penetration pricing.

Viral mechanics:

Free or cheap users who generate referrals can be worth the cost. But measure actual referral value, not just hope.

Learning phase:

Early products might underprice while learning what value they actually deliver. Just don’t stay there.

The Price Increase Framework

A step-by-step approach to raising prices.

Step 1: Research current value perception

Ask existing customers why they pay and what they’d pay. Ask churned customers what would have kept them.

Step 2: Analyze the market

What do competitors charge? What are alternatives? Where is the value ceiling?

Step 3: Test with new customers

Implement higher prices for new signups. Monitor conversion rate and feedback.

Step 4: Analyze results

Did conversion drop significantly? Did customer quality improve? What’s net revenue impact?

Step 5: Decide on rollout

If new price works, decide how to transition existing customers. Grandfather some, notify others.

Step 6: Communicate and implement

Roll out changes with appropriate communication. Monitor churn and feedback.

Step 7: Iterate

Pricing is never done. Markets change, products evolve, value perception shifts. Revisit regularly.

Common Pricing Mistakes

Avoid these errors.

Pricing too early:

Setting prices before understanding value means guessing. Talk to customers first.

Pricing once:

Set and forget doesn’t work. Revisit pricing quarterly at minimum.

Competing on price:

Unless you have structural cost advantages, price competition is a race to the bottom. Compete on value instead.

Over-complicated pricing:

Complex pricing creates friction. If customers can’t quickly understand what they’ll pay, they leave.

Simple pricing that captures less value beats complex pricing that confuses everyone.

Ignoring segments:

One price for everyone means overcharging some and undercharging others. Segmentation captures more value.

The Uncomfortable Truth

Most founders who read about pricing still don’t raise prices. The knowledge doesn’t translate to action.

Why? Because raising prices is emotionally difficult. It feels risky. It triggers fears.

But here’s reality: the founders who raise prices rarely regret it. The ones who stay underpriced often do.

You’re probably leaving 30-50% on the table. Your product is worth more than you charge. Your customers would pay more if you asked.

The only thing stopping you is you.

Start small if needed. Raise prices 10% for new customers. See what happens. Then raise again.

Your business will thank you.