Predicting Revenue in Usage-based Pricing

a16z Podcast

a16z

Science, Innovation, Business, Entrepreneurship, Culture, Disruption, Software Eating The World, Technology

4.4 • 1.1K Ratings

🗓️ 10 June 2024

⏱️ 38 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

Over the past decade, usage-based pricing has soared in popularity. Why? Because it aligns cost with value, letting customers pay only for what they use. But, that flexibility is not without issues - especially when it comes to predicting revenue. Fortunately, with the right process and infrastructure, your usage-based revenue can become more predictable than the traditional seat-based SaaS model. In this episode from the a16z Growth team, Fivetran’s VP of Strategy and Operations Travis Ferber and Alchemy’s Head of Sales Dan Burrill join a16z Growth’s Revenue Operations Partner Mark Regan. Together, they discuss the art of generating reliable usage-based revenue. They share tips for avoiding common pitfalls when implementing this pricing model - including how to nail sales forecasting, adopting the best tools to track usage, and deal with the initial lack of customer data.

Transcript

Click on a timestamp to play from that location

0:00.0	I happily accept some of the risks of a consumption-based model because I think that the benefits far exceed the cost.
0:09.0	These providers need to be held accountable to continuously delivering value.
0:14.0	It is not okay to simply sell a deal, walk away for 11 months, and then one month before the renewal
0:21.2	is set to go, then you re-engage and say, hey, how was the last 11 months? one month
0:24.2	if we would have just asked that question they would have told us but instead we put it down
0:29.3	on our chart as a trend that would endure for the next year and we called it
0:32.3	AR on and that's a mistake as a trend that would endure for the next year and we called it a R.
0:33.2	And that's a mistake.
0:34.9	I think actually what you're going to see is more hybrid pricing models.
0:40.2	It involves also telling them proactively how to spend less on your company
0:44.0	by implementing some best practices that will reduce their consumption.
0:48.0	There is no shortcut to creating long-term successful businesses.
0:55.0	Pricing is hard, which is why so many companies have defaulted to standard pricing models like subscription.
1:01.0	And that should come to no surprise because
1:03.9	predictable revenue is the linchpin of any company's planning, execution, and
1:08.7	ultimately valuation. But it also happens to be one of the most difficult things to nail about implementing another pricing model.
1:17.0	That is usage-based pricing, which is what we're here to talk about today.
1:22.0	Because once you've established the right processes,
1:24.4	org and compensation structures, and tech stack to operationalize it,
1:28.4	your revenue can actually become more predictable with usage-based pricing
1:32.2	than it might be with traditional sass over time.
1:35.4	So today I'll hear from A16C growth partner Mark Regan as he sits down with Travis Ferber,
	...

Please login to see the full transcript.

Previous episode | Next episode

Disclaimer: The podcast and artwork embedded on this page are from a16z, and are the property of its owner and not affiliated with or endorsed by Tapesearch.

Generated transcripts are the property of a16z and are distributed freely under the Fair Use doctrine. Transcripts generated by Tapesearch are not guaranteed to be accurate.