Have You Raised SaaS Prices?

Gusto the payroll company recently sent me a 30 day notice. SaaS fees will be increasing 22.5%. I'm on a month-to-month and not annual so maybe it's my own dumb fault for the increase but seeing as annual is the only lock in period you can buy, I wouldn't be avoiding an increase for long.

This begs some questions. Is it fair? Is it too much? But most importantly will I switch? And it gives us the topic du jour, should you be raising your SaaS pricing in 2025?

For reference here is the extend of the communication related to the increase.

Do I feel it's fair? Well, let's apply some logic. My emotional reaction is no way. I can't raise my consulting prices 22.5% to my clients. That number seems high. So, let's do the logic check.

The inflation rate in 2024 was 2.89%.

That means Gusto is increasing pricing 19.61% above the inflation rate. Well, that seems like a grab to increase profits on the backs of existing clients. But, in the context of the flat fee plus $6 per employee paid, the ratio is lower at 16.7% ($40+$6/employee of 1). For companies with dozens of employees at $6/employee the increase becomes a single digit increase.

With a payroll of 1 person, YES, this increase is too high!

But, will I switch? No.

I will be paying an extra $81 for 2025 and it's not worth my time to find a new payroll company and setup all the paperwork. Will I do it before I add employees? Probably not, because the absolute dollar expense will only get amortized over the additional employee count.

At the end of the day do I think SaaS prices should stay the same for the lifetime of a customer? It would be bad business to not raise prices, but most SaaS companies do.

I think Gusto's move here is strategic, they get to offset some of their inflation impact with an increase move that ultimately probably won't create much customer churn.

So, this begs the question? Should you be increasing your SaaS prices and what's your strategy to help balance revenue lift verses customer attrition?

At FullON Strategy we help companies determine SaaS pricing and to analyze existing customer bases for missed revenue opportunities. You'd be surprised with medium and large clients how much opportunity is actually missed. Visit us at 30-day Strategy - Own your Go-To-Market Strategy to learn more.