Complex SaaS pricing models are fashionable. Basecamp founder Jason Fried made the case for simple at SaaStock Austin.
As a long-time reader of Jason Fried's writing, I enjoyed hearing him speak at SaaStock Austin this May. During the Q&A, he elaborated on his contrarian viewpoints.
One topic he dove into was Basecamp's simple pricing philosophy, which prioritizes the Fortune 5,000,000 - not the Fortune 500.
To provide background, Jason and the BaseCamp team have a page outlining their small business orientation.
We’re for the Fortune 5,000,000. Most big software companies fight over the Fortune 500. The whales, the thousand-seat contracts, the enterprise deals. They can have them. Our favorite customers are the Fortune 5,000,000: the small and medium-sized businesses of the world, the individual freelancers, the creative shops that do the best work, not the most work.
Many SaaS vendors go-to-market with messaging that positions themselves as allies of small businesses & startups, while having a business model reliant on larger enterprises.
What struck me about Jason’s talk was his assertion that their pricing philosophy ensures big companies cannot pay more than smaller companies.
Simple pricing: a max of ~$4k/yr
BaseCamp caps the maximum price by using a uniform price on their highest plan (e.g., a flat rate price):
The maximum price any customer will pay BaseCamp is between $300 to $350 per month depending on the billing interval:
In B2B SaaS, particularly in the project management and communication category featuring Teams, Slack, Asana, Monday.com, ClickUp, and others, a price cap is quite unique — especially one set so low.
The opposite of their competitors
For most SaaS companies, a pricing model that can drive in-account expansion towards a 7-figure annual contract value is table stakes. Take Asana for example - a competitor of BaseCamp, who reviewed their new pricing and packaging in the October 2023 Investor Presentation:
The new packaging is designed to drive drive seat expansion and the rate of up-tiering. The "Enterprise" plan was layered with an "Enterprise+" plan. Asana hopes the rollout their Annual Contract Value will increase from $23k/yr to $325k/yr (amongst large customers, which they refer to as their "Core" Segment).
Slack, another Basecamp competitor, invented The Fair Billing Policy as well - although the per active user pricing only applies towards the lowest plans.
A unique business model, a unique pricing model
Basecamp simple pricing strategy is not different for the sake of being contrarian. As described by Jason Cohen, pricing determines your business model. Basecamp has operated with the intention of remaining a closely-held software business that can compete with well funded venture-backed startups and publicly traded companies. Per the 37Signals website:
"We have no investors, no board of directors, no eyes on an exit. We feel a moral obligation to exercise our independence. To do things no one would give us permission to do. To try things other companies would be afraid to try. To skip safe, and go for original."
Beyond not taking outside capital, they also want to keep the team small. To a design a business model that can operate independent of capital markets, and work with a small team - some trade-offs must be made. Jason discussed their marketing strategy relative to competitors. A publicly traded company like Asana can spend thousands of marketing dollars to a single customer. Basecamp, on the other hand, must be extremely efficient acquiring customer if the maximum annual price is ~$4k. Demand generation activities like paid advertising and sales outbounding are off the table. Basecamp must most focus on brand building. It is said that “complexity begets complexity.” In the case of BaseCamp, their business model forces trade-offs in the direction of simplicity.
SaaS pricing trends have a fashion of their own. Consumption based billing became popular alongside the emergence of product-led growth. Now, success-based pricing is being put forward as The Final Pricing Model model to monetize AI agents.
We believe variety is the spice of life at UserHub, so its refreshing to see someone make the case for Simple.