what costs to factor and how much to charge monthly


what costs do I need to consider and factor into my total cost when determining how much to charge for a subscription service?

I am developing a web based application with various subscription levels from free to premium (with one or two steps in between).

It is easy enough to determine hardware/up-time costs as my provider (heroku) has a nice model that tells me how much they'll be charging me to keep the site running at a specific capacity.

However I don't want to just break even on my website nor do I want to overcharge and push business away from me.

Do I factor in my time to the equation? should I base my prices on a specific amount of people that I forecast would want to use my services?

Total noob here, but I have a vision and the means to create it, just need help determining how to assign value to what I am delivering :)

Pricing Startup Costs Website Saas Cost Estimation

asked Oct 15 '13 at 11:58
Mike Mc Mahon
103 points
Top digital marketing agency for SEO, content marketing, and PR: Demand Roll

1 Answer


What you are facing is a classic problem that has been present for ages, and no level of technology or computational prowess will solve it lol

Your basic formula for your breakeven is (Company Operating Cost)/(Revenue). Where Company Operating Cost is everything, employees, hosting, developemnt, etc; and revenue is all incoming money from operations.
The only way to know for sure is to let the users decide.

Starting off I would forget about making a profit, you'd be lucky to break-even. Don't get scared by that statement, this is not only typical it is nearly guaranteed.

You need to build reputation and customer trust before people pay even pennies for the service, meaning price very very low for the first year at least. Any money you make dump into marketing.

Once you start getting users, you can run metrics, play with various price levels and models and see where they lead.

Metrics based pricing is the only way to know what users are and aren't willing to pay.

answered Oct 15 '13 at 21:29
820 points
  • Thanks! This is exactly the information I was looking for - Start cheap and ramp up. I'll probably be asking more and more questions about metrics gathering..etc but in the mean time I need to finish building out my site and get it into a beta state so users can get started with it! Many thanks! :) – Mike Mc Mahon 10 years ago
  • You're very welcome!! Good luck with the site.. Focus on user testing, and make sure to study and respond to Beta issues. Remember "if you build it, they will come" – User60812 10 years ago

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