How to Price Enterprise Customers

Question

Hi,I have a new startup where we typically sell our software to small businesses.However, today, a large enterprise customer (950+ seats) reached out, and is interesting in a quote, with a volume discount.I've been trying to find some guides or something that will teach us how to price this customer. What's a typical discount for a large enterprise client like (10%? 50%?)Thank you!

bradwood · Accepted Answer

Some strategies I've used previously in various consulting engagements:
Cost+: how much did it cost you to build, and how much do you want to add to offset and then secure a profit from that outlay (taking into account the fact the you will repeatedly sell the same software over an over). You could build discounted cash flow models and other spreadsheets to model the returns over time and use this analysis as a guide.
Market-based pricing: Find competitors or analogues of your offering in a similar/the same sector. Price yourself competitively against their rates.
Value-based pricing: What is the value that the client will attach to the solution. How much will it save them? What is the opportunity-cost of not procuring the solution/offering to the client. By modelling this and pricing your offering competitively against this number, you could make a sale that the client considers a good deal.
IMHO, Value-based pricing can often yield the best profitability, but you need to make sure you are pitching at the right level, and your patter is good.

zurfer · Answer

I am a bit surprised that most people recommend to charge more. What I've seen in B2B SaaS is e.g. 2.5% discount every double capacity. So if you charge them 16 times more than your typical customer you give 10% discount. But this highly depends on your situation and SLAs.

qppo · Answer

Enterprises get a premium usually, not a discount. And for good reason, software doesn't have economies of scale (which is why volume pricing is discounted for physical goods). It costs you a lot more per seat to support 1k seats than 100, since you'll have more support requests, possibly uptime guarantees, higher risks all around really.

pryelluw · Answer

Why are you doing a volume discount? Did they just ask for it?
Dont just go discounting prices to land a deal. Remember that you also have to provide support. That costs money as well.
In fact, if this deal makes up a reasonable amount of your overall revenue I would not cut prices (would actually raise them).
Be very aware companies are bullies when purchasing and sweethearts when selling

rajacombinator · Answer

Generally one charges a multiple higher for enterprise customers, in exchange for support, SLAs, and other fluff they want. And because they&rsquo;re not price sensitive.

quintes · Answer

Look out for security compliance, early stage workshops, all kinds of overheads a large org may impose.Good luck

How to Price Enterprise Customers

I am a bit surprised that most people recommend to charge more. What I've seen in B2B SaaS is e.g. 2.5% discount every double capacity. So if you charge them 16 times more than your typical customer you give 10% discount. But this highly depends on your situation and SLAs.

Generally one charges a multiple higher for enterprise customers, in exchange for support, SLAs, and other fluff they want. And because they’re not price sensitive.

Look out for security compliance, early stage workshops, all kinds of overheads a large org may impose.
Good luck