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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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Preparing for an IPO isn’t just about revenue milestones, it’s about proving your business model is scalable, disciplined, and investor-ready. And few areas spotlight this better than software pricing.
For SaaS companies, pricing isn’t a spreadsheet afterthought, it’s a core system that drives enterprise value, operational readiness, and regulatory compliance. CFOs, product leaders, and pricing heads must treat it as a strategic program tied to metrics that matter to public market investors, like retention, margins, and revenue quality, not as a last-minute financial clean-up.
In this post, we’ll show you how to get your software pricing model IPO-ready, using a practical, outcome-focused lens and real-world examples from 2023 to 2025. From aligning packaging with value metrics to modernizing your pricing systems and ensuring GAAP and ASC 606 compliance, we’ll cover what to do, and what to avoid, on your path to going public. Let’s dive in.
Pricing as a Strategic Asset in Your IPO Story
When preparing for an IPO, your monetization strategy sends a powerful signal to investors. Done right, pricing boosts:
- Annual Contract Value (ACV)
- Net Revenue Retention (NRR)
- Valuation multiples
Done poorly, it leaks value, through churn, discounting, or under-monetized expansion.
In SaaS, pricing is not just a lever, it’s the growth engine behind metrics that reign, like NRR and unit economics. Top performers often hit 120%+ NRR, a benchmark that indicates strong customer expansion.
Why NRR > 100% Matters at IPO
Because it tells a story investors love: Your customers are spending more each year, without relying solely on new sales.
A key driver of high retention and expansion is a value-based pricing model that scales with customer success. Value-based pricing (by definition) means setting prices based on the value perceived by the customer. For SaaS companies, that often means linking price to:
- Number of users
- Transaction volume
- Usage levels
These metrics track closely to customer ROI. When customers see direct value, they’re more likely to renew, expand, and stay loyal, boosting both retention and LTV.
Example: Snowflake’s usage-based pricing helped it reach 158% NRR at IPO in 2020, showcasing how tightly aligned monetization with usage can fuel massive expansion.
While 2020 is a bit earlier than our focus, recent years continue the trend: usage-based SaaS pricing is on the rise, with adoption growing from 27% of vendors in 2018 to 61% by 2023.
The takeaway is that modern software pricing models are shifting toward value-based approaches that can supercharge growth.
However, being “value-based” doesn’t mean just picking a high number, it means establishing a pricing system that consistently captures value without alienating customers. Pricing becomes IPO-ready when it delivers strong metrics (like >100% NRR, growing average deal sizes), and when you have the operational backbone to sustain those metrics at scale. In the next sections, we break down how to achieve this through smart packaging, careful choice of price metrics, robust systems, and finance controls.
Align Packaging with Customer Segments and Value
Product packaging is how you bundle features and price tiers which is the foundation of IPO-ready pricing. The goal is simple: align each package to a distinct customer segment and its value drivers. Misaligned packaging creates confusion, internal friction, and revenue leakage.
Many pricing issues trace back to unclear segmentation. Without alignment across leadership on who you're targeting and what they value, packaging decisions drift, resulting in feature bloat, inconsistent upsell paths, or offers that don’t resonate.
Start with clarity:
- Define your segments (Monetizely Step 1: Goals & Segments).
- Design offers tailored to them (Step 2: Positioning & Packaging).
This isn’t about slapping together Good-Better-Best tiers, it’s about mapping real value to real use cases. A solid structure might include:
- Startup tier with core features and usage caps.
- SMB mid-tier with integrations and light analytics.
- Enterprise tier with governance, advanced controls, and SLAs.
Avoid common traps:
- One-size-fits-none: Cramming all features into one high-end plan risks shelfware, customers pay for tools they never use, harming retention and trust.
- Over-complexity: Overly granular packaging slows sales cycles and confuses buyers. Simplicity sells, if it’s still segment-smart.
To test IPO-readiness, ask:
- Are packages clearly differentiated by segment needs and perceived value?
- Does each step-up justify its price with a step-up in outcomes?
- Are low-performing SKUs dragging down focus or resources?
Pre-IPO best practices include:
- Pruning or consolidating low-velocity SKUs.
- Focusing on a core package lineup that drives the majority of revenue.
- Adding modular upsells instead of bloating base tiers, this supports scalable expansion without confusing buyers.
Actionable Insight:
Run a packaging audit. Look for:
- Underserved segments (e.g., missing entry or upgrade paths)
- Poor value-to-price ratios (features priced above perceived worth)
- Ambiguities in feature allocation (do buyers and sellers understand the tiers?)
Refine bundles accordingly. IPO-stage confidence comes from showing both strategic clarity and commercial discipline in how you monetize your product.
Choose Pricing Models and Metrics that Reflect Customer Value
Beyond packaging, how you charge (your pricing model and metrics) must also align with customer value. IPO investors will scrutinize whether your SaaS pricing approach is both competitive and capable of driving future growth. Increasingly, leading SaaS companies adopt customer value-based pricing, meaning the price scales with the value the customer gets. In practical terms, this often means picking the right price metric (Monetizely’s Step 3). Will you charge per user, per visit, per amount of data, or a flat subscription? The right answer depends on what usage of your product correlates most with customer success.
Leading SaaS companies increasingly adopt customer value-based pricing, where price scales with the value a customer gets. That means choosing a value metric, a usage indicator tightly correlated with customer success.
- A cloud storage provider might price per GB stored.
- A marketing platform might charge per contact reached or email sent.
- Slack charges per active user, offering credits for inactive seats, a hybrid that reassures buyers and drives expansion.
The logic is simple: as the customer derives more value, they pay more. This feels fair, drives upsell, and boosts Net Revenue Retention (NRR), a critical IPO metric.
But picking the wrong metric can backfire.
Case in Point: Unity, 2023: Unity, a leading game development platform used by indie developers and large studios alike, attempted a major pricing shift in 2023. Unity is one of the world’s most popular game engines, powering thousands of games from indie hits to mobile giants. Developers choose Unity because it allows rapid prototyping, cross-platform publishing, and a deep asset ecosystem. Its business model historically revolved around licensing fees, free for small studios, with paid plans for larger enterprises.
In September 2023, Unity shocked the developer community by announcing a new pricing policy: developers would be charged $0.20 per game installation once certain revenue and install thresholds were crossed.
This wasn’t just a tweak to existing seat-based pricing, it introduced a completely new metric: number of installs, not tied to actual revenue or player engagement. It meant that the more successful a game became, the more Unity would charge, regardless of whether that success was profitable for the developer.
Why It Backfired:
- The install-based pricing felt punitive, especially to mobile and free-to-play game makers who rely on high install volumes and thin margins.
- It introduced uncertainty: How would Unity track installs across platforms? What about pirated or repeated installs?
- It broke an implicit contract: developers felt they were being retroactively taxed for success on terms they never agreed to.
Within hours, backlash erupted:
- Hundreds of developers publicly pledged to abandon Unity.
- Game studios pulled marketing budgets or halted new development on Unity.
- Investors took notice, Unity’s stock dropped, and its credibility took a hit.
Unity ultimately rolled back the policy, issuing clarifications and reducing the scope of the install fee. But the damage was done: it became a cautionary tale in how not to handle pricing changes.
Key Takeaway for SaaS Leaders: Never choose a pricing metric that feels like a penalty on growth. The right metric should scale with customer success, not punish it. If your pricing is seen as extractive or opaque, customers won’t just churn, they’ll organize.
Why Metrics Matter
Data from OpenView (2023) shows that:
- 94% of B2B SaaS companies update pricing or packaging at least once per year
- ~40% do so quarterly
- Most updates are focused on refining value metrics and aligning tiers
This dynamic, test-and-adapt mindset is essential for IPO readiness. Static pricing is a liability in fast-moving markets.
Should You Use Subscription, Usage-Based, or Hybrid Models?
Each has tradeoffs:
When considering your pricing model, also look at your SaaS models for revenue: pure subscription vs. usage-based pricing vs. hybrids. Usage-based (consumption) models can drive faster customer acquisition and higher net retention (since customers can start small and grow). As you can see in the chart below, public SaaS companies with usage-based pricing often grow faster and achieve superior net dollar retention than peers.
For instance, many cloud software firms using consumption pricing report NRR in the 110%+ range, reflecting easy land-and-expand.
Many IPO-stage companies now prefer hybrid pricing. For example:
- A base platform fee + usage overages
- A per-user fee + consumption charges above a threshold
This approach:
- Locks in stable revenue for investors
- Rewards customer growth
- Eases buyer concerns around “bill shock”
To get IPO-ready on pricing model and metrics, do the following:
- Define your value metric: What usage factor best reflects value to your customer? Ensure this is tracked and you have data on it.
- Benchmark against your industry: Understand common pricing models in your sector. Unless you plan to be a pricing model disruptor, it’s wise to use a model familiar to customers in your market. Investors will also compare you to peers, so a wildly unique model can invite extra scrutiny (unless it clearly works). You can listen to the conversation b/w Jason and Dev Kellogg here.
- Test and iterate: If you plan a pricing change (e.g. moving upmarket with a new enterprise tier or adding a usage component), consider beta testing with a subset of customers or offering it as optional before a full launch. Price changes are “high-stakes powder kegs” that need careful execution. The last thing you want pre-IPO is a PR crisis from a pricing move.
By choosing the right pricing model and metrics now, and demonstrating that you can execute changes without customer churn, you set the stage for predictable, scalable revenue that public market investors will reward.
Upgrade Your Pricing Systems and Quote-to-Cash Process
A great pricing strategy on paper isn’t enough. To scale toward IPO, you need the systems and infrastructure to operationalize pricing reliably and at scale.
Manual or makeshift tools, like quoting via spreadsheets or using homegrown billing software, quickly become liabilities. Investors will scrutinize your Quote-to-Cash (Q2C) stack, from quoting and contracting to invoicing and revenue recognition. Weaknesses here can cause revenue leakage, audit flags, or compliance failures, all of which spook IPO investors.
This is why Monetizely’s 5th step in their framework is Operationalization, making sure pricing is embedded in systems and daily operations.
Core Components of an IPO-Ready Pricing Stack
1. Implement CPQ (Configure-Price-Quote) Software
A modern CPQ (such as Salesforce CPQ, Oracle CPQ, etc.) allows your sales team to configure deals and generate quotes that strictly follow your pricing rules, ensuring no one gives away products for free or applies an unapproved discount. It handles complex price books, discount tiers, and approvals. By IPO time, you’ll want a CPQ in place (or a well-designed internal equivalent) so that every quote is correct and capture of revenue is consistent.
2. Solidify Billing & Invoicing Systems
Billing tools like Zuora, Chargebee, or Stripe Billing turn quotes into accurate invoices, handle proration, renewals, and metered usage. Poor billing systems often result in errors, disputes, and manual workarounds, all red flags in due diligence.
3. Integrate End-to-End Q2C
Ensure seamless flow across CRM → CPQ → Billing → ERP. Revenue recognition should be automated and compliant with ASC 606 ((more on this in the next section). Many IPO-bound companies undergo ERP upgrades to ensure clean financial reporting. Better to do it early than scramble during audit prep.
4. Add Pricing Analytics & Governance
Set up a “pricing control tower” or dedicated pricing ops team to:
- Track discounts, deal margins, and exceptions
- Use dashboards for KPIs like ARR/customer, average discount, expansion rates
- Flag non-compliant quotes via CPQ workflows Top-performing SaaS firms are 1.4x more likely to have 10+ FTEs focused on pricing ops.
5. Strengthen Sales Enablement
Equip your team to sell on value, not discounts:
- Build playbooks and value messaging scripts
- Stand up a deal desk for exception handling
- Train reps on pricing guardrails and negotiation techniques
Over 50% of SaaS companies still underinvest in pricing training, don’t be one of them.
6. Document Pricing Processes
For SOX and audit readiness, formalize processes for:
- Price list updates
- Non-standard deal approvals
- Versioning of pricing rules and metrics
In summary, to be IPO-ready, invest in your pricing infrastructure:
- Implement or refine CPQ: No more wild-west quoting. Structure your approvals and discount limits. This protects ACV and gross margins.
- Tighten the quote-to-cash pipeline: Ensure your CRM->CPQ->Billing->ERP flow is integrated. Every sale should seamlessly turn into an invoice and recognized revenue without manual intervention.
- Add analytics and oversight: Use dashboards to track pricing KPIs (ARR per customer, average discount, renewal uplift, etc.). This data can also feed your investor story (showing, for example, improving realized price or expansion rates).
- Document processes: Come IPO, you’ll need to document internal controls. Pricing touches revenue, so make sure you have documented processes for approving non-standard deals, updating price lists, etc., to satisfy SOX compliance down the road.
Showing that you’ve invested in this infrastructure will give investors and regulators confidence that you can handle growth without revenue mistakes.
Align Your Pricing Model with ASC 606 & GAAP Requirements
As you prepare to go public, your pricing must do more than drive growth, it must stand up to scrutiny under GAAP and ASC 606. These accounting standards determine how and when you recognize revenue, and they affect how investors perceive your financial discipline and predictability.
ASC 606, the revenue recognition standard, requires you to recognize revenue as services are delivered, not at contract signature or full prepayment. This approach gives a truer picture of performance, a must-have for IPO credibility. If your billing, pricing, and revenue recognition aren’t aligned, now is the time to catch up.
Key Pricing Areas Impacted by ASC 606
1. Subscription Terms
- Annual contracts must be recognized monthly over the service period.
- If billing is upfront (common in SaaS), you’ll show deferred revenue on the balance sheet.
- That’s acceptable, but be prepared to explain the difference between billed and recognized revenue to investors.
2. Usage-Based Fees
- These are recognized as incurred, aligning well with value-based pricing models.
- Clearly define and document performance obligations (e.g., software access, support services) for each contract.
3. Multi-Year Deals & Discounts
- Revenue must be allocated based on the standalone selling price of each year or element.
- Offering steep discounts early with higher payments later can trigger financing components or revenue allocation complexities.
- Aggressive “ramp” deals? Use with caution, they require clear disclosures and can complicate reporting.
4. Variable Consideration
- Rebates, credits, and performance guarantees must be estimated conservatively and accounted for in advance.
- Avoid surprises, any pricing lever that alters the expected value needs to be modeled and documented.
Strengthen Financial Controls Around Pricing
Formalize pricing governance to prevent compliance gaps:
- Set up an approval workflow for non-standard deals, so Sales doesn’t offer terms Finance can’t recognize.
- Implement a Deal Desk (or pricing committee) to review large or custom contracts before they’re signed.
- Document all terms, especially clauses like free extensions or refunds, which could affect recognition.
Stabilize revenue forecasting for investor confidence:
- Usage-based models can cause volatility (e.g., ±30% swings from customer behavior).
- To mitigate:
- Introduce minimum commitments or hybrid pricing models.
- Track leading indicators (e.g., usage volume) to forecast top-line performance.
- Highlight metrics like committed ARR, renewal rates, and deferred revenue in investor conversations.
Make Your Pricing Metrics Audit-Proof
Investors and auditors will look for consistency between non-GAAP metrics like ARR and your GAAP revenue:
- Define how you calculate ARR and ensure it's based on actual contract terms.
- Reconcile ARR with recognized revenue to avoid confusion in your S-1.
- Watch for pricing promotions (e.g., early renewal discounts) that may create material rights, these must be treated as deferred revenue.
IPO Pricing Compliance Checklist
- ASC 606 adopted and tested: You have gone through the 5-step revenue recognition process for your major contract types, and your auditors have reviewed it. You can explain how you handle subscriptions, upgrades, downgrades, cancellations, etc., in compliance with the standard.
- Deferred revenue audited: All booked sales that are paid but not yet recognized (deferred revenue) tie out in your financial statements. No unexplained discrepancies.
- Consistent policies: You have a revenue recognition policy and pricing policy documented. Sales and finance teams know the do’s and don’ts (e.g. “We do not bundle professional services for free without explicit revenue allocation” or “multi-year deals must include at least X% price increase per year,” whatever your guardrails are).
- Metrics ready for S-1: Key metrics affected by pricing, such as NRR, average revenue per user, customer lifetime value, gross margin on subscription vs services – are tracked and looking healthy. If any metric is off, you have a plan (perhaps your pricing change or packaging refresh is aimed to fix it).
Pricing compliance isn’t just a legal checkbox, it’s a credibility signal. “No one wants to find out post-IPO that our revenue was recognized wrong or we have to reprice half our customer base.”
Nail your pricing controls now, and you’ll ring the IPO bell with confidence, knowing your revenue model can stand up to investor scrutiny.
Conclusion: Turning Pricing Readiness into IPO Success
An IPO is a milestone, not an endpoint. The real aim is to enter the public markets with a pricing strategy that will continue to deliver growth and profitability. By following the steps and best practices outlined above, aligning to customer value, fortifying your pricing systems, and tightening financial controls, you’ll convert your pricing function from a mere tactic into a strategic asset. That not only makes for a smooth IPO process but sets you up to thrive as a public company, where scrutiny is higher and the stakes even bigger. In short, getting your pricing IPO-ready means you’re building a stronger company, one that knows how to monetize effectively, operate efficiently, and adapt quickly. And that is exactly what investors want to see in an IPO-ready SaaS business.