INDUSTRY INSIGHTS
From Per-Seat to Pay What You Want: The Wild World of Pricing Models

Pricing Models. Almost a taboo subject in construction tech. And one that definitely results in sleepless nights for the poor founders trying to navigate it.

The truth is, there is no right (or wrong) model.

In fact, I remember listening to a podcast with Toeey (Founder/CEO of Procore), who described their method of volume-based pricing as “contrarian” and one their customers don’t love.

If the true pioneer of construction tech says it. What hope do the rest of us have? 

With that, let’s explore some some of our guests and industry thinker’s views on Pricing models in construction tech.

(PS - if you just want the recommendations, scroll to the conclusion)

Common Pricing Models Available To Construction Tech Companies

Volume based pricing
Charges a percentage of the total construction cost. This model scales with project size and can align with the value provided on larger projects.

Per seat pricing
A typical SaaS model where customers pay for each user (e.g., £500 per seat). This is straightforward but can limit adoption within organizations.

Per project pricing
Fees are based on the size or complexity of individual projects. This can be more intuitive for construction clients used to project-based budgeting.

Value based pricing
Charges based on the quantifiable value provided (e.g., "We save you £X, so we charge £Y"). This directly ties pricing to ROI but can be complex to implement.

Processing based/Resource based
Pricing is determined by the amount of computing resources or processing power used. This can be fair but may be difficult for clients to predict costs.

Token based pricing
Customers purchase and expend 'tokens' to use various features. This allows for flexible usage but may require education for customers unfamiliar with the model.

Pay What You Want
Allows customers to determine the price they pay. While unconventional, it can build goodwill and potentially lead to higher average prices in some scenarios.

Each of these models has its own strengths and challenges in the context of construction technology. 

The choice depends on factors like the specific product, target market, and company goals. 

In the following sections, we'll explore insights from industry leaders on how they approach pricing in this unique sector.

Tooey Courtemanche - CEO, Procore

(for the record, Tooey hasn’t been a guest on Bricks & Bytes… yet. 
PPS Procore employees that read this, feel free to put in a good word ;))!

• Procore uses volume-based pricing rather than typical per-seat models used by most SaaS companies

• Volume-based pricing is wildly unpopular with customers

• However, they believe it is the ultimate yardstick and gives customers flexibility to scale Procore usage up and down

• It allows everyone to be connected; only the main customer pays and all other team members and collaborators get a seat

• Fun Fact: Tooey still gets on calls occasionally with customers who wish they had a different pricing model, indicating it remains somewhat controversial.

Dev Amratia - Co Founder, CEO nPlan (episode coming soon)

nPlan's approach to pricing is both structured and flexible.

They offer two main product tiers:

• a core version priced at around $500 per month, and 

• a pro version that reaches into six figures.

The core version provides basic functionality, such as probabilistic project schedule visualidation, while the pro version offers advanced features including a recommendation engine, deep insights, management plans, and comprehensive reporting systems.

Dev emphasises that their pricing strategy was developed through an iterative process, constantly seeking customer input on what they'd be willing to pay.

For their premium offering, they initially used consultant fees as a benchmark, aiming to provide a more cost-effective and efficient solution than traditional consulting.

When it comes to advice for other entrepreneurs in the construction SaaS space, Dev offers several key points:

• Expect your initial pricing to be incorrect

• Iterate rapidly with customer feedback

• Actively seek opinions on fair pricing

• Ensure your pricing isn't too low by making sure some potential customers decline

nPlan views their model as a hybrid between SaaS and outcome-based service, particularly for their high-end pro version. Dev notes that they're still in the experimental phase with their SaaS model for the lower-cost offering, emphasizing the importance of finding the right market fit and being open to trying different approaches.

Ultimately, Dev stresses that pricing is an ongoing process of refinement and adjustment.

He believes that you never truly perfect your pricing strategy, but rather continuously evolve it to meet market demands and reflect the value you provide.

Patric Hellermann - General Partner, Foundamental

From this episode and this episode. A take on subscription-based pricing.

In these episodes, Patric notes that most VCs prefer recurring subscription revenue, with a preference for annual subscriptions due to their reliability.

However, some VCs favor monthly subscriptions as they allow for better churn control.

Patric also discusses alternative pricing models, such as token-based systems where customers purchase tokens to access software or specific features. He highlights the growing popularity of hybrid models, which typically combine a base subscription or freemium model for basic features with a pay-as-you-go option for additional functionalities.

When it comes to subscription pricing, Patric outlines three main approaches:

• Feature-based pricing

• Usage-based pricing

• Seat-based pricing

While presenting these common approaches, Patric emphasises that this is a general overview rather than a specific recommendation. He acknowledges that variations and different approaches may be necessary depending on the specific product and market. 

The key takeaway is that pricing strategies should be tailored to the unique characteristics of each construction tech solution and its target market.

Rohan Jawali - Founder, Joist AI

Joist uses headcount as a proxy for company revenue, which informs their pricing structure. 

Interestingly, Rohan candidly admits that their current model was chosen as "the laziest approach," indicating that they're still in an experimental phase with their pricing.

Looking ahead, Joist AI is considering a shift towards a base platform price combined with token-based pricing. This model would allow users more flexibility to scale their usage as needed. 

Rohan anticipates that refining their pricing strategy will be an ongoing process over the next two years, acknowledging the inherent challenges and lack of a one-size-fits-all solution in pricing.

In Rohan's view, successful pricing in the construction tech space hinges on three key factors:

• Understanding the market

• Proving value to customers

• Keeping the pricing model simple

One notable aspect of Joist AI's approach is their minimal spending on sales and marketing, relying instead on inbound inquiries for customer acquisition. This suggests a strong product-market fit and effective word-of-mouth referrals.

When it comes to AI-powered tools, Rohan highlights the unique challenges in pricing. 

He suggests that traditional per-seat models may not be suitable for AI-enhanced products, advocating instead for a value-based approach. Rather than charging flat SaaS fees, Rohan believes in focusing on providing and capturing value, aligning the company's success more closely with the benefits delivered to customers.

Parker Mundt - VP Platform, Suffolk Technologies

Parker offers a comprehensive approach to pricing strategy for construction tech startups. He recommends a phased approach, starting with project-by-project pricing to gain initial traction and demonstrate value. As companies grow, Parker advises transitioning to enterprise agreements with tiered pricing based on usage, whether measured by the number of projects or users.

For enterprise deals, Parker suggests setting a floor price and then adding tiers as usage increases. He cautions against pricing solely as a percentage of total project cost, as this can lead customers to question the value as their projects grow larger. Instead, he emphasizes the importance of a flexible pricing model that can scale with customer usage.

When structuring enterprise agreements, Parker recommends longer-term contracts (e.g., 24 months) with a minimum commitment and the ability to increase usage and pricing over time. 

He acknowledges that transitioning from per-project to enterprise pricing is challenging, describing it as "an art."

For startups at different stages, Parker offers tailored advice:

• Early-stage companies: Start with per-project pricing for simplicity and clarity

• Growing companies: Iterate on pricing models based on customer feedback

• Scaling companies: Balance SaaS-style recurring revenue (desired by investors) with the project-based nature of the construction industry

Throughout all stages, Parker emphasizes the importance of understanding the decision-making and payment processes within customer organizations. This insight allows companies to tailor their pricing models to align with how their customers actually buy and use construction technology.

Mike Powers - Founder, BuildVision

Mike takes a unique approach to pricing in the construction tech space. He holds a "contrarian take" that the industry can't support another $100 million/year revenue business based on SaaS fees outside of project management. 

This perspective has shaped BuildVision's innovative pricing model.

Their approach offers free access to their procurement network, with SaaS fees for advanced functionality primarily to cover operational costs. The core of their value proposition lies in facilitating more efficient transactions and offering additional financial and transportation services.

BuildVision employs a dynamic pricing structure, taking a percentage of buying volume that ranges from 0.1% to 10-15%, depending on the contractor's size and platform usage. This aligns with their philosophy of only making money when their customers do, encapsulated in Mike's statement:

Mike is critical of traditional SaaS models in construction tech, arguing that it's difficult to justify these fees given the financial realities of construction companies. He believes the industry has yet to discover the ideal pricing model, contrasting it with design software where hourly-based pricing is more applicable.

Instead of flat SaaS fees, BuildVision focuses on:

• Providing tangible value to customers

• Capturing a portion of the value they create

• Proving real ROI rather than promising hypothetical savings

This approach reflects Mike's emphasis on demonstrating concrete benefits in construction tech, moving beyond mere promises to deliver measurable improvements in efficiency and profitability.

Erin Khan - Founder, Erin Khan Consulting

Thank you Erin for your contribution to our Slack channel! Here are my notes:

When developing a pricing strategy for construction tech, it's crucial to take a comprehensive and adaptable approach. Start by thoroughly educating yourself on the various pricing models available, and understanding their advantages and disadvantages. 

This knowledge will enable you to select the most appropriate model for your product and market, while also preparing you to pivot as your product evolves.

It's essential to consider the specific purchasing processes of your target companies. Each contractor may have unique internal dynamics that significantly influence the sales experience. For instance:

• Some may have regional offices that centralize bulk tech purchases

• Others might prefer per-project pricing

Understanding these nuances can help you tailor your pricing strategy more effectively.

For pricing models that target specific projects, be aware of the expense reimbursement limits for project teams. Working within these limits can often streamline the purchasing process by reducing red tape and additional reviews required for more expensive solutions.

Remember that pricing isn't a set-and-forget task. Regularly re-evaluate your model to ensure it reflects the evolving value of your product or solution as development continues. This ongoing assessment helps maintain alignment between your pricing and the value you're delivering to customers.

Lastly, be patient when it comes to enterprise accounts. They typically don't materialize overnight. 

Anticipate the need to prove ROI and demonstrate success with an introductory pricing model before scaling to enterprise-level agreements. This gradual approach allows you to build trust and demonstrate value, paving the way for larger, more comprehensive deals in the future.

Conclusion & Recommendations

As you can see, there are wide-ranging views on pricing in construction technology. And nearly everyone has their own view and opinion.

Side note: When we sat down with Dev and asked the question on pricing models I suddenly had an introspective realisation that maybe the question doesn’t even make sense… but that’s for another time.

Based on the variety of styles and pricing methods, it’s impossible to give any concrete recommendations and advice. The most important thing is to tailor a pricing model that you feel comfortable with and that your customers are willing to accept. 

But, it’s also important to educate and be aware of what the industry views.

With that said, here are 10 recommendations following the above:

1. Start with project-based pricing to gain traction, then evolve to tiered enterprise agreements as you scale. This allows you to prove value before asking for bigger commitments.
   

2. Iterate on your pricing model constantly. Your first attempt will be wrong, so get customer feedback early and often. Pricing is a journey, not a destination.
   

3. Focus on providing and capturing value, not just charging flat fees. If you're not making money, your customer probably isn't either. Align your success with your customers.
   

4. Design your pricing to encourage widespread adoption within client organizations. Per-seat models can limit your growth. Make it easy for your solution to spread.
   

5. Understand who actually pays for your product within customer organizations and tailor your pricing accordingly. The user and the buyer are often different people.
   

6. Keep your pricing simple. Complex models confuse clients and slow down sales. Clarity beats complexity every time.
   

7. Don't be afraid of unconventional pricing models, but be prepared to educate customers on their benefits. Innovation can be a differentiator if communicated well.
   

8. Avoid discounting. Instead, offer additional value or services to justify your price. Protect your margins while still being flexible.
   

9. Use early adopters and case studies to prove your value proposition. Their logos are worth more than any marketing campaign. Social proof is powerful in construction.
   

10. Balance investor desires for recurring revenue with the project-based nature of construction. Be creative in your approach. Find ways to create predictable revenue in an unpredictable industry.

Interested in learning more? Check out the full episodes👇

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