The subscription economy has revolutionized the B2B SaaS landscape, offering businesses predictable revenue streams and scalable growth opportunities. In this environment, selecting the right billing model is crucial for long-term success.
A well-aligned billing strategy not only meets customer expectations but also helps achieve business goals like maximizing growth and reducing churn. Choosing the wrong model, on the other hand, can stifle expansion or alienate clients.
As B2B SaaS companies evolve, their billing strategies must adapt to support scalability, maintain competitiveness, and meet the diverse needs of enterprise clients.
In this article, we’ll explore the most common subscription billing models for B2B SaaS, helping you determine which one best fits your business.
Common Subscription Billing Models for B2B SaaS
As the B2B SaaS market matures, several distinct billing models have emerged, each with its own strengths and ideal use cases. Let’s explore the most common of these models.
Flat-Rate Subscription Model
In the straightforward flat-rate pricing model, customers pay a single, fixed price for access to your SaaS product or service. This model is characterized by its simplicity and predictability, and it works well for businesses offering one core product or service.
The flat-rate subscription model is ideal for:
- B2B SaaS products with a focused feature set
- Startups looking to simplify their pricing strategy
- Services where usage doesn’t significantly impact costs
Here’s an example of flat-rate billing from Basecamp:
Flat-rate pricing works well for B2B SaaS companies with a streamlined product offering and relatively uniform customer needs. However, it’s important to ensure that the fixed price adequately covers costs and allows for profitable growth.
Additionally, you want to keep in mind that this model offers limited flexibility for larger or diverse customer needs. In fact, it may hinder growth if your service becomes too broad for a single price point to cover.
Per-User/Per-Seat Billing Model
Per-user or per-seat pricing is a model where customers pay based on the number of individual users or “seats” accessing the SaaS product. This model is popular in team-oriented SaaS solutions, offering scalability as companies grow their user base.
According to Younium, automated billing software designed for this business model helps record revenue according to the IFRS 15 or ASC 606 rules and guidelines, so there is no worry about revenue recognition not being compiled.
The per-user/seat billing model is ideal for:
- SaaS solutions with collaborative features or team-based usage
- Businesses targeting mid-to-large organizations
- Software with clear per-user value propositions
Here’s an example from Figma:
While this model enables predictable revenue growth, it can lead to higher churn if users find the cost-per-seat burdensome as teams expand. It can also lead to customer dissatisfaction if user adoption stagnates, as businesses are charged regardless of usage intensity.
Usage-Based Pricing
Also known as pay-as-you-go, usage based pricing charges customers based on how much of the service they consume.
This model aligns revenue with actual customer usage, making it highly attractive for businesses that scale up or down their usage frequently. SaaS companies set rates which often include a base fee, plus variable charges.
These rates are based on metrics like data usage, API calls, or storage. The advantages of this billing model include a strong alignment between customer value and cost. However, it can create revenue unpredictability for your business.
Usage-based pricing works best for:
- Cloud services, APIs, and infrastructure providers
- Businesses offering metered or consumption-driven products
- Clients seeking flexibility in their billing
Here’s how Carthook implements this model:
Successful implementation requires clear usage metrics, transparent billing, and robust tracking systems. These ensure customer satisfaction and the effective management of billing complexity.
As explained in the SmallBusiness HQ CRM Tips guide, the right type of CRM system and subscription billing software integration can help businesses solve billing complexity through effective communication between users and service providers.
Tiered Pricing Model
In the tiered pricing model, customers choose from multiple pricing tiers, each offering different features, service levels, or usage limits. This allows businesses to cater to different customer needs and budgets.
Tiered pricing typically includes basic, professional, and enterprise levels. These tiers come with a specific set of features or usage limits.
Here’s who the tiered pricing model is ideal for:
- SaaS products with diverse customer segments
- Businesses with a broad feature set (multiple features or premium services)
- Companies looking to upsell or create clear upgrade paths for their customers
Here’s an example from Omnisend:
This model facilitates capturing more value from customers as their needs grow. It also maximizes revenue from customers of various sizes and needs. Still, it requires careful planning to ensure meaningful differentiation between tiers.
Align Your Billing Model with Business Goals
As we’ve explored, each subscription billing model offers unique advantages and challenges for B2B SaaS businesses.
The key to success lies in selecting a model that not only aligns with your offering but also resonates with your target customers and supports your long-term business objectives.
Remember, your billing model is not set in stone. As your business evolves and market conditions change, it’s crucial to regularly review and adjust your pricing strategy. For long-term success, stay attuned to customer feedback, monitor industry trends, and be prepared to adapt.