The SaaS subscription model charges customers a recurring fee, monthly or annual, for access to hosted software, usually in tiers. In 2026 most fast-growing SaaS and AI companies blend a base subscription with usage or credits, because AI costs vary by customer and seats shrink as AI does more work. Check gross margin, CAC payback and churn before you scale.
Key takeaways
- Of 33 companies that crossed about $100 million ARR in 2026 with visible pricing, 18 charged mainly on consumption and only 4 mainly on seats (our research).
- A hybrid of subscription plus credits or usage is the 2026 default for AI-heavy products.
- Median private SaaS benchmarks for 2025: about 20% growth, 101% to 104% net revenue retention, 80% software gross margin.
- AI features can halve your gross margin if they aren't priced. Put heavy AI use on a meter or a cap.
- Australian B2B SaaS on standard terms faces subscription duties for small business customers from 1 July 2027.
After my marketing agency, I joined forces with my brother. He knew how to build great software. I could sell and market it. The dream team.
Our first product was an e-learning academy for architecture and engineering students. Unique product, great audience and, best of all, recurring subscription revenue.
It did well enough that we built software for architects and property developers next. That's when things took off.
When people ask me what made the difference, I give them the same two-word answer I put in the book: recurring revenue and a moat.
Both still matter in 2026. But how SaaS companies charge has changed more in the last two years than in the decade before.
What Does the SaaS Subscription Model Look Like in 2026?
Here's the short version: seats are out of fashion, and meters are in.
We tracked 44 companies that crossed roughly $100 million in annual recurring revenue during 2026, as reported by ARR Club (mostly company-reported figures). Of the 33 whose pricing we could see:
- 18 (55%) charged mainly on consumption: usage, credits, a usage hybrid or outcomes;
- only 4 relied mainly on seats;
- 13 offered a permanent free tier or free product.
ICONIQ's 2026 survey of AI builders points the same way. Consumption pricing rose from 35% to 42% of companies, and outcome pricing from 18% to 23%, with companies blending an average of 1.7 pricing models, according to SaaStr's summary. The full breakdown is in our report on how 2026's fastest-growing companies price.
Why? Two reasons.
AI costs money per use. Traditional SaaS had gross margins of 75% to 80% because an extra user cost almost nothing. AI products run at an estimated 25% to 60%, according to investor surveys such as Bessemer's and ICONIQ's, because every task burns tokens. A flat fee with no limit lets your heaviest users eat your margin.
AI shrinks seats. WiseTech Global, the Australian logistics software company, removed seat fees from CargoWise in December 2025 and moved to transaction pricing, saying "our revenue is not diluted by customers becoming more productive." By February 2026 about 95% of CargoWise customers were on the new model. See how WiseTech killed seat fees.
The base subscription isn't dead. It's become the floor, with a meter on top. That's hybrid pricing, and it's now the default for AI-heavy products.
Which of the Book's Models Fit a SaaS Company?
SaaS is Model #7 in the book, of course. But the best SaaS businesses mix in others.
| Model | How SaaS companies use it | Example |
|---|---|---|
| Software as a Service | Monthly or annual access to the product | Almost everyone |
| Minimum Commitment | Annual contracts, committed usage or a monthly minimum | turbopuffer's tier minimums of $16, $256 and $4,096 a month |
| Bundled Services | Implementation and support inside the subscription | TechnologyOne's "SaaS+" |
| Member Benefits | Community, certification, priority support | Developer and partner programs |
| Insurance | Uptime guarantees and premium support plans | Enterprise SLAs |
| Consumables (adapted) | Credits that get used up and topped up | AI app credit packs |
TechnologyOne is a good Australian example of bundling. Its "SaaS+" offer includes implementation in the subscription, which removes the big upfront bill. For FY25 it reported ARR of A$554.6 million, up 18%, and net revenue retention of 115%. You can read more about the model in Model #7: Software as a Service.
A Sample Three-Tier SaaS Plan (With Credits)
Here's an illustrative plan for an Australian B2B SaaS product: job management software for trades businesses, with an AI quoting assistant. Prices are examples only, ex-GST.
| Solo | Team | Business | |
|---|---|---|---|
| Monthly price (ex-GST, illustrative) | A$49 | A$199 | A$499 |
| Annual price | A$490 (two months free) | A$1,990 | A$4,990 |
| Users included | 1 | 5 | 15 |
| Extra users | Not available | A$25 each | A$20 each |
| Jobs | 50 a month | Unlimited | Unlimited |
| AI quote credits | 50 a month | 500 a month | 2,000 a month |
| Extra credits | A$10 per 100 | A$10 per 100 | A$8 per 100 |
| Integrations (accounting, payments) | Accounting only | All standard | All, plus API access |
| Support | Email and chat | Priority phone, onboarding session |
Three design choices are worth copying. Jobs are unlimited on paid tiers, because a job costs you almost nothing. AI credits are capped, because they cost you real money. And extra users are cheap, because you don't want to punish a customer for growing. For more on choosing the meter, see the value metric guide.
Check your AI margin before you launch
Model token costs, heavy users and gross margin for each plan with the free AI Gross Margin Calculator.
Does Your SaaS Plan Make Money? The Unit Economics
Gross margin per customer = (Monthly price − Hosting − AI inference − Support − Payment fees) ÷ Monthly price
CAC payback (months) = Customer acquisition cost ÷ (Monthly price × Gross margin)
Worked example: the Team plan (illustrative, ex-GST)
Price: A$199 a month.
Costs per customer: hosting and third-party services A$12, support A$6, AI inference for an average customer A$24, card fees at about 2% A$4. Total A$46. Gross margin: (199 − 46) ÷ 199 = 77%, or A$153 a month.
Customer acquisition cost (ads, content, sales time): A$1,200. CAC payback: 1,200 ÷ 153 = about 7.8 months.
Monthly churn of 2.5% gives an average customer life of 40 months. Lifetime gross profit: 153 × 40 = A$6,120. LTV:CAC = 6,120 ÷ 1,200 = about 5.1x.
Now the heavy user: a customer who uses all 500 credits and buys 1,000 more. Inference rises to A$80, but they pay A$100 for the extra credits. Revenue is A$299, costs about A$104, and margin holds at about 65%. Without the credit cap, the same customer would cost you A$80 of inference on a A$199 fee, and your margin would fall to about 49%.
How do those numbers compare? Median private SaaS benchmarks for 2025 show software gross margin of about 80%, CAC payback of 16 months and LTV:CAC of 4.1x, according to Aleph and Benchmarkit. Our SaaS benchmarks page has the full tables by company size.
Run your own plans through the AI Gross Margin Calculator and the LTV:CAC and Payback Calculator.
AI Gross Margin CalculatorModel token costs, heavy users and margin for an AI product.Open the free tool →How to Launch (or Reprice) a SaaS Product: Eight Steps
- Pick your value metric. What grows as the customer succeeds? Jobs, documents, transactions, AI tasks.
- Separate cheap and costly features. Cheap features can be generous or unlimited. Costly ones (AI, storage, messages) get a cap or a meter.
- Build three tiers around customer stage. Solo, team, business. Don't build them around your feature list.
- Choose free trial, freemium or neither. Read freemium vs free trial before you give anything away.
- Set the annual offer. Two months free is the usual convention.
- Publish the price. Our research found the 11 fastest growers with no public prices were all enterprise-only. If you sell self-serve, show the number.
- Instrument the metrics. MRR, churn, net revenue retention and gross margin by tier, from day one.
- Plan your first price review. A fixed date, once a year. Xero uses 1 July.
The Pitfalls That Catch SaaS Founders
Unpriced AI. The fastest way to destroy a SaaS margin in 2026 is to bundle unlimited AI into a flat fee. Cursor, Replit and others have reworked their pricing, and faced customer backlash, as AI costs per user climbed. Read pricing AI into a SaaS product.
Silent allowance cuts. Several AI tools lost customer trust by quietly reducing what a plan included at the same price. Announce changes early and explain them.
Seat compression. If your customers' teams are getting smaller because of AI, seat revenue will follow. Add a usage or outcome component before it shows up in your churn.
Discounting to close. Big first-year discounts create a price cliff at renewal. If you must discount, step it up over time, as Canva did when it repriced legacy Teams customers.
Forgetting failed payments. Card failures are a large share of churn for self-serve SaaS. Build dunning and card updates in early.
Australian Notes for SaaS Companies
General information as at October 2026, not legal or tax advice.
Subscription rules from 1 July 2027. SaaS plans that renew until canceled are very likely subscription contracts under the Unfair Trading Practices Act 2026. The notice and easy-cancellation duties also protect small business customers on standard form contracts (fewer than 100 employees or under A$10 million turnover). If customers can sign up online, they must be able to cancel online. See Australia's subscription trap laws.
GST. Australian SaaS companies registered for GST generally charge 10% on sales to Australian customers. Sales to overseas customers may be GST-free in some cases, so check with your adviser. Overseas SaaS businesses selling to Australian consumers may need to register too, per the ATO's guidance on imported digital products. More detail: GST on subscriptions.
R&D tax incentive. Some software development can qualify for the R&D tax incentive, but the rules are specific. Read the R&D tax incentive for software and get advice before you claim.
Price rises. The ACCC's October 2025 case against Microsoft over Microsoft 365 consumer price rises is a reminder to tell customers about every option, including cheaper plans, when prices go up.
The Accountant's Angle: Valuation, Cash and Revenue Recognition
SaaS is where the book's valuation point is clearest. Subscription businesses are often valued on a multiple of revenue rather than profit, and the multiple rises with growth, retention and margin. See SaaS valuation multiples for current ranges.
Three things to get right in your own numbers:
- Annual plans bring cash forward, but most of that cash is deferred revenue until you deliver the service.
- Gross margin is now a pricing decision. With AI in the product, your pricing page and your margin are the same conversation.
- Contracted revenue vs run rate. Investors and buyers increasingly look past headline run rate to contracted revenue, net revenue retention and churn.
To see how recurring revenue changes cash flow and value against one-off sales, try the Subscription vs One-off Profit Calculator. For the GST and fee side of each plan, use the Subscription Price Calculator.
Free Subscription Profit Review
Australian business owners can book a free 30-minute review with a BPAG Accountants adviser. An honest conversation about:
- whether a subscription model could work for your business
- how recurring revenue could cover your fixed costs each month
- how it could lift what your business is worth
No cost, no obligation. General information only until we understand your situation.
What to Do Next
Open your pricing page and your cost data side by side. For each tier, answer three questions:
- What does my heaviest 10% of customers cost me each month?
- What happens to my revenue if each customer's team halves?
- Is there a meter that grows as the customer gets more value?
If the answers make you uncomfortable, you've found your next pricing project. And remember the book's other half: recurring revenue gets you started, but a moat keeps you there.
Frequently asked questions
Should a new SaaS product charge per seat or by usage?
Charge on the unit that grows as your customer gets more value. If value comes from more people using the tool, seats still work. If value comes from work done (documents processed, jobs booked, AI tasks run), a usage or credit metric grows with the customer and survives AI shrinking their team. Many companies use a base subscription plus a usage component to get both.
Do SaaS startups need a free plan?
Not always. A free plan works when the product is cheap to serve and spreads through use, like collaboration tools. If each free user costs you AI inference or support, a free trial or a low-priced entry tier is safer. Our research found that 13 of the 44 fastest-growing companies in 2026 had a permanent free tier or free product.
What discount should annual SaaS plans get?
Two months free (about 17% off) is the most common convention, and it works because it's easy to understand. The right discount depends on your monthly churn: if you lose many monthly customers in the first year, a bigger annual discount can still pay. Model it with your own churn rate before you choose.
How often should a SaaS company raise prices?
Review prices every year and change them when you've added clear value. Xero raises Australian prices on a fixed date each July. Canva repriced legacy Teams customers in 2024 after four years without a change, tying the rise to its AI tools and softening it with a discounted first year. Grandfathering existing customers reduces churn but delays the revenue gain.
Is SaaS still a good business model with AI?
Yes, but the economics have shifted. Customers still want subscriptions for predictability, and recurring revenue is still valued highly. What's changed is that AI adds a real cost per user, so pricing must account for heavy users, and seat counts may fall as AI does more of the work. Price on value delivered, not headcount.
General information only, current as at October 2026. It isn't legal, tax or financial advice and doesn't consider your circumstances. Speak to a qualified adviser before acting.
Talk it through with a BPAG adviser
Free for Australian business owners: a 30-minute Subscription Profit Review on whether a subscription suits your business.
Robert Coorey, MBA
Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.
Sources
- Subscription Playbook research: Fast growers 2026, 44 companies that crossed ~$100M ARR (compiled 27 Oct 2026 from ARR Club and company pricing pages)
- SaaStr summary of ICONIQ's 2026 State of AI report (10 July 2026)
- Aleph and Benchmarkit, 2026 SaaS & AI Performance Benchmarks (2025 data): gross margin
- High Alpha, 2025 SaaS Benchmarks Report
- WiseTech Global, 1H26 results investor briefing scripts (February 2026)
- TechnologyOne, FY25 full-year results presentation (November 2025)
- ATO: GST on imported services and digital products
- Competition and Consumer Amendment (Unfair Trading Practices) Act 2026 (No. 64, 2026)
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.