#200: The Biggest Pricing Mistakes That Hurt Growing SaaS Companies - TJ Joosten

TJ Joosten discusses the importance of understanding pricing friction in SaaS sales. He emphasizes that if only a small percentage (less than 20%) of deals experience pushback on pricing, it indicates the company may be underpricing. Conversely, if many deals push back, it might be a sign to raise prices. TJ suggests directly asking customers why they didn't buy if price is a concern, as this helps identify whether pricing truly is an obstacle. The overarching theme is that continuous testing and validation of pricing strategies are vital for growth.

TJ shares his background of over a decade in SaaS, building and selling software from startups to larger operations. He co-founded RevFixr to address the lack of structured playbooks in B2B SaaS pricing. His approach involves hands-on, practical work with early-stage startups (from around $1M to $20M in ARR), helping them optimize pricing and packaging to maximize revenue without necessarily creating new products. TJ's philosophy revolves around real-world experience, testing, and validation, rather than theory alone.

The discussion explores how AI impacts SaaS pricing. TJ highlights the shift towards usage-based and hybrid pricing models, stressing that these can de-risk customer purchases and better capture value. He notes that many companies are experimenting with AI integration, but must manage customer expectations around costs, usage limits, and fair usage caps. The conversation also touches on the competitive advantages of AI-enabled, tech-integrated solutions and emphasizes continuous experimentation and adjustment in pricing amid rapid technological change.

TJ compares European and U.S. SaaS markets, pointing out that differences are often more pronounced within Europe than between Europe and North America. He mentions that U.S. companies tend to have more pricing maturity, with greater openness to creative pricing models. European markets can be more conservative, especially in southern countries. Currency, culture, and market maturity influence pricing strategies, but the overall trend is toward more similar practices globally, especially with increasing adoption of SaaS and AI.

TJ discusses how private equity firms focus heavily on optimizing pricing when acquiring and growing SaaS companies. They often see opportunities that founders underappreciate, such as raising prices or redesigning packaging to close the monetization gap— the difference between the value a company creates and what it captures. He emphasizes that private equity is more aggressive in pushing price increases, especially during Earning Periods, and that founders should proactively address their pricing strategies to maximize valuation.

TJ explores how AI has transformed pricing models, advocating for more usage-based and hybrid approaches, which help capture more value and give customers confidence that they're paying fairly based on usage. He discusses the challenges of AI variable costs, risk management, and the importance of caps and fair usage policies. The conversation also covers how AI agents can command premium pricing when positioned as intelligent assistants embedded into workflows, and how this represents a strategic shift for SaaS companies.

TJ notes that as SaaS companies grow from around $1M to $10M in ARR, ownership and focus on pricing tend to shift. Early-stage companies often experiment with different models, while at around $5M, founders usually own pricing directly. As companies mature, different teams (sales, product, finance) may inadvertently silo or misalign on pricing strategies. He advises having a dedicated owner for pricing, supported by a council of stakeholders, to maintain a cohesive approach. Larger companies should continue testing and adjusting their pricing to match their market position.

TJ advocates for founders to adopt a mindset of continuous testing, where each sales quote is an opportunity to learn and improve pricing. He encourages trying different tactics (like raising prices, adding fees, or experimenting with usage models) in real deals to gain confidence and optimize revenue. He stresses that pricing is not a one-time decision but an ongoing process that, when executed thoughtfully, can significantly boost profitability.