Capturing Value in Private Equity: 8 Signs Your B2B SaaS Portfolio Company Needs a Pricing Transformation
Designed for PE operators and value creation teams, this session outlines eight common signals that pricing has become a drag on performance. It helps investors identify pricing leakage early and prioritize the changes most likely to drive improvements in retention, expansion, and margin.
Key Takeaways
1. There Are 3 Levels of Pricing Analysis
- Light Analysis:
- Your portco has never updated its pricing strategy.
- Your portco’s sales team is not asking for more discount flexibility.
- Medium Analysis:
- Your portco has low cross-sell and/or upsell rates.
- Your portco’s revenue is reoccurring (rather than truly recurring).
- Your portco has a time lag between “request for proposal” and “quote.”
- Most of your portco’s customers purchase the “best” package.
- Deep Analysis:
- Your portco has high discounting with illogical variability.
- Your portco has increased prices without churn or dissatisfaction.
By understanding and leveraging these levels of analysis, investors can effectively diagnose pricing strategies and implement tailored solutions that drive growth and value in their B2B SaaS portfolio.
2. Core Pricing Principle: Price Differentiation
Understanding price differentiation is crucial for maximizing value capture, as different customers exhibit varying willingness-to-pay; portfolio companies can enhance their market value by offering multiple price points.
Adding a Premium tier often represents a significant opportunity for companies with a monolithic offering. In a case study presented by James, a subscription box company introduced a Deluxe tier above their existing Premium tier, which resulted in a 30% revenue gain from this strategic addition.
3. Easy to Identify: Your Portco Has Never Updated Its Pricing Strategy
If your portfolio company has not updated its pricing strategy within the last four years, it’s definitely time for a pricing transformation.
Two fundamental truths highlight this necessity:
- Their original pricing strategy was likely based on "founder-based pricing," where initial prices set by the founder or early team remain unchanged due to a lack of knowledge or bandwidth to update them.
- Even if the pricing was optimized at some point, it becomes outdated after three years.
Moreover, 3 of the 4 lenses of pricing strategy—company objectives, product improvements, and market fluctuations—evolve over time, underscoring the need for regular assessments and updates to maintain competitiveness.
Slides
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Slides
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Transcript
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Designed for PE operators and value creation teams, this session outlines eight common signals that pricing has become a drag on performance. It helps investors identify pricing leakage early and prioritize the changes most likely to drive improvements in retention, expansion, and margin.
Complete the form to access the key takeaways, full session recording, and slide deck.
Once you’ve completed the form, you’ll also unlock our full library of pricing masterclasses, covering topics like usage-based pricing, strategic discounting, price architecture, packaging, monetizing new capabilities, and more. Head to the Masterclasses area in Resources to explore them all.
