About This Episide

Brian Lanier, CFO of PDQ.COM. joins me to discuss frameworks and thought processes around the pricing of SaaS products. Brian recently joined PDQ.com and we speak briefly about his top priorities as a new CFO. Next, we dive deep and discuss the ways he has approached SaaS product pricing including: constructing a pricing model, resolving pricing differences, Identifying when pricing needs to be adjusted.

#1 First 60 days as a new CFO/Head of Finance 

• What is the role of the CFO to you? 
• What is the presence of the CFO in the Org (Hammer vs invisible) 
  • Trusted partner, try to be involved without being seen as a roadblock
• Critical initiatives/Priorities
  • Learn-Product, business, G2M, team, build relationships
  • Cash, other critical needs, then long term strategy
  • Model and understand the business, identify levers
  • Start with biggest levers and easy wins first
  • Don’t forget insurance review, SOX lite controls review-policies, docs, training (People, Process, Tools)
• Team Structure? 
  • Eliminate layers, Close to the customer, align with business model
  • FP&A/Accounting side by side, similar to Product/Dev
• What do you like to be responsible for?
  • Finance/HR/Operations? All, depending on the needs of the company

#2 Pricing a SaaS Product 

• What is the role of the CFO in pricing? Who ultimately owns pricing? 
  • Depends on talent in the company – product marketing
• Scenario:
  • What is the role of the CFO in pricing? Oversight, strategic alignment
  • Two Rules:
    • Keep it Simple, Alignment
    • Credible No-Brainer  (Value Prop)
  • Double check internal metrics, market fit, feasibility
• CEO asks you to Model out a SaaS pricing model
  • Purpose/High level discussion of model
    • Needed functionality  – Value prop and price point, drivers, cost inputs, projected volume, Unit economics, breakeven, reasonableness checks
    • How should model output be discussed – working sessions, education and collaboration
• What information is needed?
  • Variables?
    • Unit Economics marketing/sales costs (CAC ratio), hosting costs, equipment, volume, build costs, personnel support
    • Breakeven both from the company’s and the customer’s perspective
    • Cross Sell/UpSell? G2M strategy, TAM, speed to market depend on this–who you’ll sell to, etc.
• As time goes on, how are you monitoring the price performance of the newly launched product? Same as other products, ARR, # customers, costs vs plan
  • How do you know if pricing needs adjustment? Up/Down? Win/Loss tracking – overall traction, feedback, competitors
• Scenario
  • Your company is planning to launch 2 new products next year? How should the CFO Think about these products and pricing as it relates to the operating plan?
    • How detailed do you model out the pricing assumptions? Detailed, drivers, unit economics
    • What inputs discussions are needed before incorporating pricing into your operating plan? Timing, # sales people, capacity, success assumptions, cross sale vs new market, then I scale back 🙂
• Resources
  • Any good websites/books/podcasts that you listen to for more insights? I just keep my ears open for good books