Enterprise Pricing Paradox

Sam Parr and Shaan Puri discuss how underpricing is a common mistake among entrepreneurs, particularly those who are young or inexperienced. They emphasize that charging too little can actually harm your business and that many companies, especially in the enterprise space, are comfortable with and even expect higher prices.

• Underpricing is a Major Business Mistake

  • Trends (their business) makes millions in subscription revenue at $300/year
  • Could have charged $30,000/year with relatively minor changes
  • Similar amount of work would have yielded dramatically different results

• Psychology Behind Underpricing

  • Young entrepreneurs often underprice because they personally wouldn't spend large amounts
  • Fear and lack of experience lead to charging too little
  • It's "cuter to be cheaper" but ultimately disrespectful to your product

• Enterprise Customer Psychology

  • Large companies are actually more comfortable with higher price tags
  • Low prices ($300) can be off-putting to enterprise customers
  • Companies have significant budgets for products/services they value

• Common Pricing Mistakes

  • Starting with low prices creates an anchor that's hard to break
  • Insecurity leads to fear of raising prices
  • Many don't understand how much money large companies are willing to spend

• Marc Andreessen's Advice

  • Simple two-word advice: "charge more"
  • Most startups charge significantly less than they should
  • This is one of his primary pieces of advice for startups

• Personal Experience

  • Sam admits to lacking courage and knowledge to charge more when younger
  • Only understood proper pricing after seeing inside large companies (Hubspot)
  • Recognizes now that $2,000+ price points are normal for enterprise customers