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The Complete Startup Playbook for B2B Pricing
@ a16z speedrun
05/17/25
Takeaways
MM
Macy Mills
05/17/25
@ a16z speedrun
I'm Macy Mills, a business development partner at A16Z Speedrun, and I've spent over a decade in B2B sales, revenue, and partnerships, focusing on innovative ways to scale revenue.
MM
Macy Mills
05/17/25
@ a16z speedrun
Understanding the distinction between B2B and B2C is crucial for startups, as it influences product development and pricing strategies.
MM
Macy Mills
05/17/25
@ a16z speedrun
B2B products often foster collaboration, allowing users to derive value while working with others, as seen in applications like Slack and Notion.
MM
Macy Mills
05/17/25
@ a16z speedrun
If your product generates less than $10,000 in annual contract value, you might be operating in the B2C space, though this isn't a strict rule.
MM
Macy Mills
05/17/25
@ a16z speedrun
Top-down sales involve traditional methods like phone calls and lead generation, while product-led growth (PLG) is more organic and can take longer to establish.
MM
Macy Mills
05/17/25
@ a16z speedrun
You can successfully run both product-led growth and top-down sales strategies simultaneously, maximizing growth opportunities in both market segments.
MM
Macy Mills
05/17/25
@ a16z speedrun
The right B2B pricing model depends on your product, costs, and ideal customer profile, with various models available to suit different needs.
MM
Macy Mills
05/17/25
@ a16z speedrun
Usage-based pricing, where customers pay based on consumption, is gaining popularity, especially among cloud providers and AI products, as it scales with user demand.
MM
Macy Mills
05/17/25
@ a16z speedrun
Subscription-based pricing offers predictability for both businesses and customers, often combining user-based pricing with monthly or annual subscriptions.
MM
Macy Mills
05/17/25
@ a16z speedrun
Project-based pricing is common in consultancy and professional services, but founders should transition to more scalable pricing models as soon as possible.
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Macy Mills
05/17/25
@ a16z speedrun
Site-based pricing, which restricts access to specific locations, is losing popularity as remote work becomes the norm, and is not typically recommended for founders.
MM
Macy Mills
05/17/25
@ a16z speedrun
Blending usage-based pricing with subscription pricing can provide predictability while allowing for growth, especially for AI startups.
MM
Macy Mills
05/17/25
@ a16z speedrun
Tiering in pricing allows you to cater to different user needs and ideal customer profiles by offering various features at different price points.
MM
Macy Mills
05/17/25
@ a16z speedrun
Don't undervalue your product; while it's okay to start with lower prices, avoid making it a habit as it can lead to long-term pricing issues.
MM
Macy Mills
05/17/25
@ a16z speedrun
Market research and customer feedback are essential; pay attention to what customers say and don't say about your product's value and implementation.
MM
Macy Mills
05/17/25
@ a16z speedrun
Keep your pricing simple and transparent; complexity can deter customers from making a purchase decision.
MM
Macy Mills
05/17/25
@ a16z speedrun
Avoid pricing tiers based on self-declared data, as it places the burden on customers to determine their costs, which can lead to confusion and dissatisfaction.
MM
Macy Mills
05/17/25
@ a16z speedrun
Don't set pricing based on compliance as a sales strategy, as it can lead to complications and customer dissatisfaction. Don't discourage adoption through your pricing model; think of pricing as an invitation, not a barrier, to make it easy for new users to adopt your product.
MM
Macy Mills
05/17/25
@ a16z speedrun
Offering free or low-cost plans can lower the barrier to entry, making it easier for customers to say yes and see the value of your product.
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Macy Mills
05/17/25
@ a16z speedrun
Consider offering a discount for commitment, such as 10-20% off for annual subscriptions, to encourage adoption and ensure revenue predictability.
MM
Macy Mills
05/17/25
@ a16z speedrun
Simplify and scale with tiered pricing; avoid having too many tiers to prevent confusion and ensure that your pricing aligns with your ideal customer profile.
MM
Macy Mills
05/17/25
@ a16z speedrun
Test your pricing to find out how much customers are willing to pay; as your product matures, your ideal customer profile may change, and you should adapt your pricing accordingly.
MM
Macy Mills
05/17/25
@ a16z speedrun
Track the number of paying customers to measure growth; increasing customer acquisition rates can demonstrate to investors how quickly you're scaling.
MM
Macy Mills
05/17/25
@ a16z speedrun
Monitor annual recurring revenue (ARR) and annual contract value (ACV) to assess how well your pricing is working and to show traction to investors.
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Macy Mills
05/17/25
@ a16z speedrun
Evaluate the length of your sales cycle to determine if your pricing is correct; ensure that it is getting shorter over time as you refine your approach.
MM
Macy Mills
05/17/25
@ a16z speedrun
Churn rate is crucial to track; understanding why customers leave can help improve retention and inform future pricing strategies.
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Macy Mills
05/17/25
@ a16z speedrun
Net revenue retention measures the percentage of recurring revenue from current users, reflecting how well your company retains and expands its user base.
MM
Macy Mills
05/17/25
@ a16z speedrun
Pricing isn't just a number; it's a strategy that should evolve as your business grows, allowing for flexibility and adaptation to avoid common mistakes.