Ishaan Agarwal, Senior Product Manager at Square.
Slack charges per user. So do Microsoft Teams and Google Workspace. In fact, nearly every B2B SaaS company does.
Everyone complains about per-seat pricing—that it’s unfair and outdated and doesn’t reflect real value. But companies keep using it anyway. Not because they’re stupid, but because they’ve tried everything else, and nothing works as well as the thing everyone hates.
Here’s the dirty secret: Per-seat pricing isn’t about fairness. It’s about predictability. And in business software, I’ve found that predictability wins over fairness.
The Usage-Based Pricing Trap
Usage-based pricing sounds perfect: Pay for what you actually use. AWS does it. Twilio does it. So, why doesn’t everyone else?
Most software isn’t infrastructure. When you use AWS, you know exactly what you’re doing—spinning up servers, running compute and storing data. Usage maps directly to business value. More usage means more business. It’s a clean relationship.
Now try that with a platform like Slack. What’s a message worth? Is reading one message “usage”? What about searching old threads? You end up inventing metrics that don’t mean anything. “Active users” turns into a debate about what “active” even means. Is it daily or weekly, or does just opening the app count?
I observed a startup try usage-based pricing for its project management tool and charge per task created. As a result, people stopped creating tasks. They crammed multiple items into single tasks instead, and the pricing model broke the product.
Usage-based pricing only works when usage equals value, and for most SaaS products, it doesn’t. A salesperson who sends one critical email might create more value than someone who sends hundreds. Try explaining that to your billing system.
Why Companies Stick With Seats
Per-seat pricing takes a much simpler approach. You count humans—something everyone can do. The finance team knows exactly what next month will cost, while the customer understands the invoice without reading the fine print.
The predictability isn’t just about budgeting—it’s about behavior. With per-seat pricing, once someone has a seat, they can use the product freely. There are no mental transaction costs or second-guessing whether that next search is worth two cents. They just use it.
Salesforce realized this 20 years ago and never forgot. Their pricing includes multiple editions, endless add-ons and extra-cost features. But at the core, it’s always per seat. They’ve watched a hundred competitors try consumption pricing, value-based pricing and flat fees. While the competition has gradually disappeared, Salesforce is worth over $240 billion.
The real genius of per-seat pricing is that it grows automatically. Companies hire people; new people need accounts, and revenue rises. There’s no sales call, no upsell and no negotiation—just natural expansion that scales with the customer’s growth.
The Enterprise Pricing Theater
In enterprise software, the pricing conversation becomes something more like performance art, where list prices exist mostly for show. A company might quote $150 per user, but a large customer negotiates down to $30 and buys 10,000 seats—half of which go unused. Nobody objects.
The customer gets to claim an 80% discount victory. The SaaS company locks in predictable revenue. The unused licenses act as a buffer—insurance against future growth or internal politics. Everyone gets what they want, and the illusion of rational pricing stays intact.
Startups often misread this as inefficiency that they can “fix” with usage-based or fairer pricing. But enterprise buyers don’t optimize for efficiency—they optimize for predictability. If it fits neatly into a spreadsheet and passes finance review, that’s the real win.
The Alternative That Doesn’t Work
Flat-rate pricing sounds refreshing in theory: one simple price, unlimited users. Basecamp still champions this model—but they’re the exception, not the rule. Most SaaS companies can’t afford it. A 10-person team paying the same as a 100-person company quickly breaks the economics.
So, teams try to adjust with tiers—10 users, 50 users, 100 users. But that only repackages per-seat pricing into larger bundles. Companies near the top of a tier delay hiring or avoid adding users just to sidestep a sudden price jump. In this way, the simplicity that flat-rate pricing promises can evaporate the moment you scale.
Why This Won’t Change
Per-seat pricing survives because it aligns with how most businesses think. Companies think in head count. Budgets are per person. Software per person just makes sense (even when it doesn’t).
Per-seat pricing also hides complexity in plain sight. While some companies try to make the cost of access fairer—charging only for “active” users or metering activity—that quickly turns into a debate about what counts as usage and who qualifies. The administrative overhead often outweighs the savings. Others, like Microsoft, sidestep the issue entirely through bundling. When a product like Teams comes packaged with everything else, the per-seat model everyone complains about simply disappears into the bundle.
The model everyone hates is the model everyone understands. Your innovative pricing strategy might be better in theory, but it requires education and change management. Getting a company to be the guinea pig for a pricing experiment is often a difficult ask.
I’ve seen countless companies model the alternatives, test them and go back to seats. At the end of the day, the pricing model everyone hates is also the one everyone agrees on.
The next time someone pitches you revolutionary SaaS pricing, ask them one question: “How do I budget for this?” If the answer takes more than one sentence, it’s likely already too complex.
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