What It Means (Simple Explanation)
User-based pricing means customers pay based on how many users or seats they have. The more users they add, the more they’re billed. It’s one of the simplest and most common SaaS pricing models.
Example
A company pays $20/user/month. If they have 10 users, their monthly bill is $200. Add five more users? The bill adjusts to $300.
Why This Matters (To SaaS & Finance Teams)
This model scales directly with user engagement and team growth. It’s easy to explain and sell. But tracking it manually—or without system enforcement—leads to billing gaps and missed revenue.
Ordway helps automate user-based billing by syncing license counts with invoices, usage data, and revenue schedules inside its billing platform.
How It Works (Break It Down Simply)
- Customers sign up with a user count (or add users later)
- Each user has a set monthly fee
- Billing adjusts as user count changes—automatically or on the next cycle
- Usage feeds into revenue recognition and MRR
Common Headaches
- Manual tracking of user count
- Discrepancies between app user count and billing
- Customers gaming the system by deleting/reactivating users
- Confusion about bill increases when teams scale fast
Best Practices
- Use system-driven license tracking (not manual entry)
- Show seat counts and charges clearly on invoices
- Set rules for minimum user count or thresholds
- Align billing with contract terms (monthly, annual)
- Audit user usage vs. billing regularly
When to Use User-Based Pricing
Best for tools where the value obtained is closely linked to the number of users on the platform —like productivity, CRMs, communications, file sharing, and office apps. Works well when customer teams grow over time.KPI Impact / What It Affects
Ties directly to expansion revenue, NRR, MRR expansion, and churn. Easy to model, but needs automation to scale cleanly.Tip from the Field
Ordway’s Subscription Billing Guide walks through best practices for pricing by seat, managing plan upgrades, and enforcing limits cleanly across finance, product, and sales.
FAQ Section (Quick Answers to Real Questions)
What is the difference between user-based and usage-based pricing models?
User-based pricing charges customers based on the number of active users or seats accessing a service, offering predictability and a clear cost structure. In contrast, usage-based pricing bills customers according to how much they consume a specific feature, resource, or service, which can directly align cost with value derived but may lead to more variable billing. Both models are designed to monetize value, but through different consumption metrics.
How can user-based pricing be implemented in a SaaS business?
Implementing user-based pricing in SaaS involves clearly defining what constitutes a “user” and establishing transparent per-user rates or tiers. Businesses need a flexible subscription billing platform to accurately track user counts, manage subscriptions, automate invoicing, and handle prorations for adding or removing users. Integrating this system with customer identity management ensures accurate billing and a seamless experience.
What are the benefits of user-based pricing for B2B companies?
For B2B companies, user-based pricing provides predictable revenue streams, making financial forecasting more reliable. It simplifies budgeting for customers, as they have a clear understanding of costs based on their team size. This model also encourages broader adoption within an organization without immediate cost implications for feature use, fostering deeper engagement.
What are the challenges of user-based pricing and how can they be solved?
A common challenge with user-based pricing is the potential for customers to seek unlimited users or to “seat-share” to avoid higher costs. Solutions include offering tiered pricing with volume discounts to incentivize growth, or implementing hybrid models that combine a base fee with per-user charges. Transparent communication of value and leveraging advanced billing software to track active users can mitigate these issues.
What subscription billing software is best for managing user-based pricing?
Effective management of user-based pricing requires robust subscription billing software capable of precise user tracking, flexible pricing configuration, and automated billing workflows. The ideal platform should support various pricing tiers, handle complex prorations for user changes, and offer deep insights into subscription metrics. This ensures accurate revenue recognition and streamlines the entire quote-to-cash process.
How can user-based pricing be integrated with CRM and ERP systems?
Integrating user-based pricing with CRM and ERP systems is crucial for operational efficiency and data consistency. A sophisticated subscription billing platform should seamlessly connect with CRM to provide sales and support teams with real-time customer subscription data, empowering informed interactions. Integration with ERP ensures accurate financial reporting, automates revenue recognition, and streamlines the order-to-cash cycle across the organization.
Is the user-based pricing model scalable?
Yes, the user-based pricing model is highly scalable, especially when supported by a modern subscription management infrastructure. As a business acquires more customers and their teams expand, the per-user revenue scales directly with that growth. Utilizing an automated and flexible billing system is essential to efficiently manage increasing user volumes, diverse pricing tiers, and frequent subscription changes without manual intervention.
Want to Go Deeper?
See how Ordway supports flexible user-based billing and real-time usage tracking. Request a demo or check out the Subscription Billing Guide.
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