Dear SaaStr: What is a Good Approach For Price Increases with SMBs?

Dear SaaStr: What is a Good Approach For Price Increases with SMBs?

Raising prices in SaaS serving SMBs is tricky but necessary as you scale. SMBs are price-sensitive, so you need to approach this thoughtfully to avoid churn while still driving growth. Here’s how I’d recommend tackling it:

1. Don’t Raise Prices Too Early. Spend That Energy Getting More Customers Instead.

If you’re still growing fast (even just 30%+ annually, really), focus on adding customers and increasing value rather than hiking prices. Price increases are better suited for when growth slows, or you’ve hit a more mature stage.

2. Add Real, True Value Before Raising Prices. Too Few Do This.

SMBs are quick to churn if they feel they’re being taxed without added value. Pair any price increase with clear, tangible improvements—new features, integrations, better support, or anything that makes the increase feel justified. Ideally, you want to show you’ve delivered 2x the value of the price hike.

3. Introduce Higher-Tier Plans. This Introduces Much Less Friction.

Instead of raising prices across the board, consider adding a new, premium plan with advanced features. This lets you upsell without alienating your base. For example, at Adobe Sign / EchoSign, we introduced a global edition at a higher price point, but made it optional. It worked because it felt like a benefit, not a penalty.

4. Small, Predictable Increases. Give Plenty of Notice.

If you do raise prices, keep it modest (5-6% annually is a good benchmark) and give plenty of notice (3-4 months). This approach minimizes friction and sets expectations for customers.

5. Test and Learn. So You Can Walk Back Any Big Mistakes.

SMBs will churn when you raise prices. Every single time. Enterprises don’t, but some segment of SMBs always do. So if you can, start with small experiments. Test price increases on a subset of customers or new sign-ups to gauge reactions. This helps you refine your strategy before rolling it out broadly.

6. Frequency. Too Much Is … Too Much.

Once you’re at scale, annual price increases can work well, especially if you’re adding value consistently. But for SMBs, I’d avoid doing this more than once a year. Too frequent changes can erode trust and push customers to shop around.

7. Consider Grandfathering Early Customers into Early Pricing, At Least for An Extended Period

They took a risk on you, and are often your biggest champions. And raising prices on this small cohort rarely moves the needle.

Remember, SMBs are quick to churn if they feel squeezed, so tread carefully. Focus on delivering value, communicating transparently, and testing your approach.