Software bill calculator

How each pricing model compounds

A monthly price hides its own size. The habit worth building is to convert every software charge into a yearly figure and then ask one question of it: what makes this number go up? The answer is different for each model, and it tells you whether the bill will stay roughly where it is or climb with the business.

Per seat

You pay for each person with a login, so the bill follows payroll. Every hire adds a seat, including part-time and seasonal staff, and managers who only read a report once a week. Two things make it worse over time. Seats are rarely removed when people leave, so the billed count drifts above the real one. And features are often held back for higher tiers, where moving up re-prices every seat you already have.

Per unit

The charge attaches to what the software manages: a rental property, a location, a vehicle, a court, a truck. It follows the size of the operation, which means growth is billed even when no extra person touches the system. Businesses on per-unit pricing usually carry several tools priced the same way, so the honest rate per unit is the sum of all of them.

Per ticket or per transaction

A fixed fee on each ticket, registration or booking follows volume. A sell-out costs more than a quiet night, and adding a second event doubles the base. A fixed fee also weighs most on your cheapest tickets, because it is the same amount whatever the ticket costs.

Percent of revenue

A share of each sale is the model that compounds fastest, because it rises with volume and with price. When you put prices up to cover your own costs, part of the increase goes to the software vendor, whose costs did not change. To put a yearly figure on it, apply the rate in your agreement to last year's revenue through the platform. To use it in the calculator above, divide that yearly amount by twelve and enter it as the flat monthly fee.

How to read a SaaS invoice

Pull the last invoice and the one from a year earlier and read them side by side. Most invoices have the same handful of lines, and each one scales with something different.

• Base plan or platform fee. The flat part. Note the tier name, since the tier decides which features you are allowed to use.
• Seats, users or licences. A quantity and a rate. Check the quantity against a list of the people who really use the product.
• Add-on modules. Texting, reporting, online booking, integrations and the like. These often began as a trial and were never reviewed again.
• Usage or overage. Messages sent, contacts stored, transactions processed above an allowance. This is the line that moves without anyone deciding it should.
• Payment processing. Sometimes shown on the same statement. Keep it separate in your own sums.
• Billing period and term. Monthly or annual, and the date the agreement renews. If it renews automatically, find the notice window and put it in a calendar.

Comparing two invoices a year apart shows which line grew. If the quantity grew, the cause is your own headcount or volume. If the rate grew, it is a price increase or a tier change. Knowing which one it was tells you what next year will look like.

What to count as total cost

The subscription is the visible part. A fair total, for rented and owned software alike, also includes the following.

• Every seat and every unit, at next year's count. If you plan to hire or expand, price the bill at the size you expect to be.
• Add-ons and connected tools. The second and third subscriptions that exist only because the first one lacks a feature.
• Implementation and onboarding. One-off set-up, data import and training fees, spread across the years you expect to stay.
• Admin time. The hours someone spends exporting from one system and importing into another, fixing duplicates, or rebuilding a report in a spreadsheet every month. Count the hours honestly and price them at what that person costs you.
• Workarounds. Anything staff do outside the system because the system cannot do it your way.
• The cost of leaving. What an export contains, what it leaves behind, and any fee or notice period attached to cancelling.

Lay those out over three years. One year flatters rented software, because the one-off costs of any alternative land in year one. Three years is long enough for growth in seats, units or volume to show.

What to do with the number

If the three-year figure is modest and the bill does not grow as you grow, renting is the right answer and you can stop here. Plenty of software is worth exactly what it costs.

If the figure is large, or climbing every year for reasons that have nothing to do with the software getting better, it is worth comparing against owning. Our guide to owning your software covers how to weigh build against rent, how to switch without betting the business on it, and the cases where custom software is the wrong call. If you want a figure for your own situation, send us the bill using the form below and we will send back a number.