Billing on Autopilot with Flexibility!!

The Problems We are Solving

Based on our continuous industry interviews, customer discovery, product feedback, and community participation, we have observed the following status quo regarding billing operations in the startup world today.

• Pricing is a unique strategy for businesses, not industries. Copying others' pricing does not give an advantage to early-stage startups because they are playing a game with rules defined by others. A superior pricing strategy is the key to playing a game you can win.

• Billing practices vary from company to company, even among competitors in the same homogeneous industry.

• The tools involved in billing practices are extremely fragmented, resulting in siloed data. Just to name a few: Postgres, Google Sheets, NetSuite, Quickbooks, Stripe, internal systems, etc.

• At every stage of a company, someone has to work on billing in a manual or semi-manual way, including founders, BizOps, Prod, Eng, and RevOps. These tasks include, but are not limited to:

  • Share data: contract price, product usage, discount, historical bills, credits, etc.

  • Billing cycles: create bills, review, approve, send, collect payments

  • Collect failed payments and answer customer questions about bills

  • Handle special cases in customer billing that are not coded into the billing system

  • Synchronize data between systems, consolidate, fix, and utilize (Sales/Accounting/Finance/Growth/Product/Engineering)

  • Write one-off scripts to extract data from the production database for reporting or analytics purposes.

• Team spends half a day to 5 days per month works on something of billing, which is insane.

Welcome: Paigo 2.0

Based on these observations, we have invested a significant amount of effort into Paigo 2.0 and are now making it generally available as the Billing Autopilot with Flexibility. Here are the key feature highlights

Pricing Management

Subscription, usage limit, enterprise contract, annual commitment, usage-based, pay-as-you-go, free trial, discount, etc. You name it. Just configure, define, test, and iterate your pricing strategies with limitless possibilities.

Billing Lifecycle

Automated invoicing, payment collection, revenue recovery, customer onboarding, credit card management... all billing toolkit automated on a clock.

Usage Data Metering

The most scalable usage data metering system in the industry that meters usage data by: REST API, S3, Kafka, Kinesis, Prometheus, Grafana, Vector, or Bring-your-own-DataInfra.

No-code Billing Stack

Set up a complete billing stack with your branding without writing a single line of code.

• No-code Customer Usage Dashboard

• No-code Customer Invoice Portal

• No-code Credit Card Management Portal

• No-code Public Pricing Page

• No-code Pricing Calculator

• No-code Customer Subscription Management Portal

Humanly Possible Automation

Paigo supports thousands of external system automations, including but not limited to: Salesforce, QuickBook, Amplitude, Mixpanel, Stripe, Webhook, Slack, Hubspot, Pendo, ClickUp, Notion, Google Sheets, OpenAI, ChatGPT, etc.

Fully automate your revenue and billing operations - like it's humanly possible.

Take Actions Now

If you interested in learning more about Paigo 2.0, schedule a time to talk to a product expert here!

Framework #1: Plans with Product Usage Entitlement

Who uses this: Retool (YC W17), Zapier (YC S12), ClickUp, Clay Labs

How It Works:

• There are typically a limited number of pricing plans, usually ranging from 3 to 5.

• Each pricing plan has a fixed payment amount per billing cycle.

• Each plan includes one or more product metrics that have usage limits as entitlements.

• Billing takes place at the start of the billing cycle as a pre-commitment.

Example Pricing Schema:

Zapier is well-known for its perfectly planned pricing strategies, which set a standard in the industry. The company offers four self-service pricing plans, catering to a wide range of customer needs and budgets, with prices ranging from $0/month to $3999/month. These plans effectively regulate customers' usage across various product metrics, including Tasks/month, Zaps, and Premium Apps. As an illustration, the Zapier Starter plan presents an enticing option at $19.99 USD/month, encompassing 750 Tasks per month, 20 Zaps, and access to 3 premium apps.

Variations:

• Multiple sub-tiers are available within each plan. Such as Zapier task runs or Clay credits

• Offer time-based free trial or credit-based free trial

• Overage charges apply for exceeding the limits of each pricing plan

• Add-on feature flags

• Offer annual discounts

Pros:

• Relatively simple pricing hierarchy to understand

• Price discrimination (bundling of multiple metrics as one package)

• More predictability in revenue for the seller, as well as the cost of the buyer

Cons:

Leaving money on the table is a common pitfall. This pricing strategy is usually not granular, leaving ample room for improving revenue, growth, and net revenue retention. Some customers will try to stay within a pricing category to avoid overspending. There are companies that continuously add more pricing plans, add-ons, etc. in order to minimize the revenue left behind. However, this eventually makes the pricing more difficult for buyers to understand and for sellers to manage internally. For instance, ClickUp is a major proponent of this pricing model. To avoid this pitfall, they currently offer 5 pricing plans that encompass approximately 50 product metrics entitlements, as well as 2 add-on feature pricings. Additionally, the add-on features also have up to 4 pricing tiers.

Framework #2: Pay-as-you-Go

Who Uses This: OpenAI (YC W16), InfluxDB Serverless (YC W13), Supabase (S20), Replit (YC W18)

How It Works:

• The amount to be paid is not fixed, as it depends on the usage of the product during each billing cycle.

• Product metrics are usually assigned a unit price.

• Billing takes place at the conclusion of the billing cycle.

Example Pricing Schema:

The OpenAI API offers a transparent pricing structure that is solely determined by token usage. For instance, the cost for utilizing the 8K context in GPT-4 is $0.03 per 1K tokens input and $0.06 per 1K tokens output.

Variations:

• Offer time-based free trial, usage-based free trial, or credit-based free trial

• Require a fixed platform fee before pay-as-you-go kicks in

• Enforce a minimum charge

• Usage increment: the minimum bundle of product units to be charged. For example, compute resource related billing metrics, the usage increment is usually an hour. So any additional usage beyond an hour is rounded up to an hour. AWS EC2 employs this increment pricing policy.

Volume discounts. (See framework #3)

Pros:

• Lowest barrier to entry: Begin with no commitment or subscription fees.

• Billing occurs after the end of each billing cycle.

• Revenue increases in proportion to the value customers derive from our products, also known as product usage.

• An excellent strategy for enhancing Monthly Recurring Revenue (MRR), Annual Recurring Revenue (ARR), and Net Revenue Retention (NRR).

• Naturally aligns with product-led growth and self-service approaches.

Cons:

• It is crucial to select the most effective combinations of pricing metrics.

• Buyers struggle to accurately estimate the upfront cost of purchasing. Therefore, enterprise sales for upper market and pay-as-you-go don't go hand in hand because buyers would be concerned about huge bills coming from pay-as-you-go as surprises.

• This necessitates the implementation of a product metric metering infrastructure and aggregation.

• The complexity of pricing is hard to model and develop into billing systems. (Refer to possible variations above)

Framework #3: Usage Volume Bucket

Who Uses This: AWS Lambda, Azure AI Service

How It Works:

• This pricing schema operates similarly to a pay-as-you-go model.

• Pricing is determined by one or more basic product units.

• The unit price for usage is not a flat or fixed rate. Instead, it is calculated based on the total aggregated amount of usage per billing cycle.

• Generally, the unit price becomes cheaper as the amount of usage increases.

Example Pricing Schema:

Azure AI Services charges customers based on the number of transactions they make. The pricing structure is as follows:

• The first million transactions cost $1 per 1,000 transactions.

• The next nine million transactions are charged at $0.65 per 1,000 transactions.

• Subsequent transactions follow a similar pattern.

Variations:

• Usage increment: the minimum bundle of product units to be charged. In the case of Azure Cognitive Services, the usage increment is per 1,000 transactions.

• Free volume bucket. AWS Lambda has a free tier that includes 1M requests per month and a few other product metrics in the pricing.

• Requires a fixed platform fee before usage price kicks in.

• Enforce a minimum charge

Pros:

• Strikes a balance between pay-as-you-go and usage-limited pricing plans, harnessing the advantages of both approaches.

• Stimulate increased product usage by offering enticing discounts.

Cons:

• Requires a pricing calculator for buyers to estimate the potential cost of purchasing.

• Uncertainties regarding the long-term expenses for buyers.

• Demands substantial engineering effort to compute the monthly bill correctly.

Framework #4: Unified Credit System

Who Uses This: Snowflake, Confluent

How It Works:

• A unique currency system is defined by a SaaS seller.

• Each billable product metric correlates to the credit unit with a specific ratio.

• The credit unit is then associated with fiat currency using another distinct ratio.

Example Pricing Schema:

Confluent has implemented a comprehensive pricing strategy that encompasses various unified credit systems. These credit systems include CKU, which stands for Confluent Unit for Kafka, and E-CKU, which represents Elastic Confluent Unit for Kafka. Each credit unit is associated with up to eight product metrics, such as ingress, egress, storage, partition, connectors, and more. For instance, the mapping of storage with CKU is determined by the number of CKU per GB stored per hour. This approach allows for a flexible and tailored pricing structure based on specific usage metrics.

Variations:

• Multiple credit systems are available for different product lines/segments, as demonstrated by Confluent.

• Customers have the option to either pre-purchase credits or pay the bill after usage is calculated, depending on the amount of credit consumed.

• Volume purchases are eligible for discounts.

Pros:

• Communicating with buyers becomes easier when using a unified currency.

• Introducing new product lines, pricing structures, and feature add-ons is simplified because the billing and sales protocol remains consistent with the same credit unit.

• Sellers may have more control over pricings. The algorithm used to calculate credit usage can have subtle nuances. Since it is not open-sourced, SaaS sellers potentially have significant control over minor adjustments, bug fixes, and improvements for major or corner cases.

Cons:

• A well-thought design of credit system must be carefully designed in advance.

• Buyers need detailed explanations or documentation to understand the complex cost structure and credit system implications. For instance, Confluent provides a comprehensive document that explains their credit system, offers comparisons, and outlines the associated implications.

• Implementing a metering infrastructure and aggregating product metrics into credit units requires substantial engineering effort. Additionally, converting these credit units into billing currency is also a significant task.

• Buyers may experience less transparency of the exact pricing algorithm behind the credit system, which is the exact opposite of "Sellers have more control" mentioned above.

• Estimating long-term costs can be challenging for buyers.

Framework #5: Percentage of Transaction Value

Who Uses This: Stripe (S09), Upwork, FinTech Companies, E-commerce, Marketplace

How It Works:

• The products primarily handle transactions involving fiat currency, such as payments, marketplace activities, and other financial technologies.

• The main performance indicator for the product is the total value of transactions processed.

• Sellers earn a commission based on the value of each transaction they handle.

Example Pricing Schema:

Upwork charges freelancers a 10% fee on transactions between clients and themselves.

Variations:

• Fee waived for initial transactions

• Tiered transaction fees with lower fees for high volume/value

• Blended with other pricing schemes

Pros:

• Simple and easy-to-understand structure.

• Buyers can easily estimate their costs as they have anticipated revenue.

• Sellers always directly benefit from the buyer's business growth.

Cons:

• Some buyers hate revenue sharing and transaction fees.

• It requires engineering effort to accurately track transaction volumes in real time.

• Narrower use cases because this pricing scheme requires transaction processing as part of products

Future Blogs (Coming soon):

• Five Kinds of Free Trial Pricing and How You Choose for Your Business

• Design a Usage-based Pricing Model that Your Customers Love: A Primer

It took our engineering team less than one hour to set up the metering and billing with Paigo, which is extremely impressive compared to all other billing software. Since then, Paigo has efficiently managed billing operations for our clients across the US and Europe. Paigo is proven to be a reliable billing platform for fast-growing SaaS businesses.

— Pol Santamaria Mateu | Cofounder & CTO, Qbeast

Introduction

Qbeast, a prominent big data analytics software company based in Barcelona, Spain, has emerged as a trailblazer in the industry. Rooted in years of groundbreaking research at the Barcelona Supercomputing Center, Qbeast has developed an open-source data lake format that not only boasts unparalleled query performance but also delivers remarkable cost savings to its clients.

Unlocking Revenue Potential Through Usage-based Pricing

With Qbeast’s advanced technology in big data analytics, they aim to onboard a pricing model that can fully unleash the potential of the large volume of data they process for their customers so as to enable a strong upward growth trend. Qbeast was planning to experiment with data volume processed as one of the fundamental value metrics for their products. In order to execute the pricing strategy, they were looking for a solution to meter usage data and bill customers with.

Meeting Challenges Head-On: Qbeast's Journey with Paigo

Metering Massive Usage Data Concurrently

At the core of Qbeast's operation lies its role as the go-to data lake for enterprise data applications. Handling immense volumes of data in short spans is a daily norm. To ensure precise billing, Qbeast needed a billing system capable of effectively managing metered usage data concurrently. After extensive exploration of the usage-based billing landscape, Qbeast identified Paigo as a standout solution, specifically for its exceptional pull-based usage metering framework. Unlike conventional API-based methods that require the business to develop an integration layer by calling metering API, retrying, exponential back-off, and setting up schedulers to be responsible for the delivery of metering usage, Paigo's approach offers seamless integration choices, resulting in 10x higher throughput and much more reliability. After careful consideration, Qbeast implemented the S3-based usage metering approach with Paigo.

Lightning-Fast Integration in Record Time

It was a late Wednesday night in Barcelona, the engineering team of Qbeast together with CTO Pol sat down to look into integrating with Paigo to do usage metering for the first time. Remarkably, within one hour, they were able to finish all the usage metering integration without running into many challenges. Qbeast team was already familiar with AWS S3, and found it very intuitive to use S3 for usage metering.

Global Billing Mastery

Operating from Spain but serving clients across the United States and various parts of Europe, Qbeast faced the challenge of catering to diverse billing requirements. Paigo swiftly emerged as the platform of choice. Its comprehensive suite of billing features, including seamless invoice generation and management of global sales tax, perfectly aligned with Qbeast's global billing needs.

Looking Ahead

Qbeast's collaboration with Paigo is just the beginning. Qbeast is pioneering with Paigo team to adopt more usage-based billing features in their products, such as no-code billing stacks. This innovation is a testament to Qbeast's commitment to ensuring a consistent and user-friendly billing experience for their valued clients.

Curious about how Paigo can support your business’s growth needs? Schedule a demo today.

Below is the new updates for April 2023.

New Pricing Model: Fixed Subscription

Now you can create an offering that is a fixed subscription in Paigo. A fixed subscription has a fixed payment charged at the beginning of billing cycles. Subscriptions can also be enhanced with usage entitlement (see below updates) and various billing add-ons. Read the documentation from here.

Subscription - Watch Video

Usage Entitlement

Usage entitlement means customers can use products in some way (usage dimension) with a limit. For example, a subscription plan of email sending service may entitle customers to send up to 10K emails per month within the plan. The 10K emails are the entitlement. Usage entitlement is one of the most common pricing strategies for usage-based plans. Now it is generally available in Paigo as a feature of usage dimension. A dimension can be configured as entitlement, with limits, overage, or price related. Read the documentation from here.

Entitlement - Watch Video

AI-powered Paigo Documentation!

With the booming of ChatGPT, or *GPT in general, Paigo’s documentation has also enabled AI to enhance the experience. Click on the search button at the top right corner of Paigo Docs, then switch to Lens. Finally, ask any question in the text space and let AI find answers for you! Try it yourself → https://docs.paigo.tech/

Documentation AI - Watch Video

Paigo Free Trial Plan is now generally available!

Many interested customers have asked to try Paigo and feel the product themselves. So we listened and are making it happen. Effective today, any user is free to sign-up for Free Trial plan. The Free Trial plan comes with unlimited access to all exclusive features of premium plan for 30 days! To sign up, go to website, and click Free Trial at the top navigation bar.

Thanks for reading Vol. 1 of What’s up, Bill. For any questions, book a time with the usage-based billing expert here.