The 90% Margin Paradox

Last Monday, I was on my monthly advisors call discussing design updates to our pricing page. This came right after I’d shared news about a big deal that forced me to rethink everything. The prospect didn’t want to manage individual licenses and requested per-campus pricing with unlimited users. I scrambled to create tiered pricing that decreased per campus as volume increased. I thought nothing of it—just a routine sales update.

Then I showed my advisors the pricing page.

I was expecting feedback on design, instead they spent 30 minutes dissecting our pricing model. Our PLG advisor asked a simple (but dangerous) question that made my head spin: “What if you offered unlimited licenses per school for a set price to reduce your sales cycle?”

My knee-jerk response was defensive: “We can’t do that. We’re on a single-user license model. We charge per user.” But the question haunted me all week. Why was I so attached to per-seat pricing when our margins could support almost any model?

Most SaaS founders dream of 90% gross margins. But when you achieve them, you discover something counterintuitive: they create more pricing problems than they solve.

The traditional business school approach to pricing (cost plus reasonable margin) becomes meaningless when your marginal cost approaches zero. A founder recently told me he spends more on coffee for his team each month than on server costs for all his customers. This isn’t a scaling problem; it’s a pricing philosophy crisis.

The Friction Trap

When you price per seat at $15/month, you think you’re being reasonable. After all, that’s less than a lunch. But watch what happens during a demo. The prospect gets excited about your product, then asks the fatal question: “How much for our 200-person team?”

Three thousand dollars a month suddenly doesn’t sound like lunch money. Worse, you’ve just killed your PLG motion. Nobody wants to be the person who adds $180 annually to the company budget every time they invite a colleague.

This is the paradox of per-seat pricing with high margins: it penalizes exactly the behavior you want to encourage (viral adoption within organizations).

The Figma Insight

Figma understood something profound about pricing software with negligible marginal costs. They realized that design collaboration has two types of users: creators and spectators. Spectators add zero incremental cost but drive viral adoption. So they made viewing free and charged only for editing.

This wasn’t generosity; it was strategic thinking. Every free viewer becomes a potential advocate for upgrading the team to more editor seats. The viral coefficient of their PLG motion increased dramatically because sharing had no cost friction.

The Notion Bet

Notion took this logic even further. Unlimited users for $8/month sounds insane until you understand their bet: they’re not monetizing people, they’re monetizing sophistication. A 1,000-person company can use basic Notion for $8/month total. But as they grow sophisticated—advanced permissions, integrations, analytics—they’ll upgrade to higher tiers.

This only works with extremely high margins. Notion can afford to have enterprise teams using their product essentially for free because they’re betting on feature expansion over time. Their unit economics make this sustainable in ways that would bankrupt a 20% margin business.

The Bootstrap Advantage

Interestingly, bootstrap founders often have more pricing flexibility than their venture-backed counterparts. Without investors demanding specific growth metrics, they can optimize for long-term sustainability over quarterly ARR targets.

When venture-backed competitors launch aggressive freemium models subsidized by investor capital, bootstrap founders with high margins can play a different game entirely. They can focus on building sustainable unit economics while competitors burn cash trying to buy market share.

The Enterprise Paradox

Here’s what nobody tells you about high-margin SaaS pricing: sometimes your biggest customers should pay the least per user. A 10-person team getting $50,000/year of value might happily pay $500/month. But a 500-person team getting $500,000/year of value will balk at $25,000/month, even though their per-user value is identical.

This violates our sense of fairness, but it reflects economic reality. Large organizations have different budget processes, approval chains, and price sensitivity. Your pricing model needs to account for these organizational dynamics, not just mathematical proportionality.

Finding Your Model

The right pricing strategy for high-margin SaaS depends on understanding your viral mechanics. Ask yourself:

Does value correlate with team size, or with usage intensity? Slack chose per-user because communication value increases with network size. But Superhuman chose flat-rate because email efficiency is personal, not collaborative.

What drives expansion within accounts? If it’s adding users, per-seat makes sense. If it’s feature sophistication, tier-based pricing works better. If it’s outcome achievement, consider usage-based or outcome-based models.

Where does friction kill adoption? Every pricing boundary creates adoption friction. The question is whether that friction prevents valuable usage or just prevents unprofitable usage.

The Uncomfortable Truth

The hardest part of pricing high-margin software isn’t finding the right price. It’s overcoming the psychological discomfort of charging far less than the value you create. When a founder realizes their $50/month tool saves customers $5,000/month, their instinct is to raise prices 10x. Sometimes that’s right, but often it misses the bigger opportunity.

The goal isn’t to capture maximum value from each customer today. It’s to remove every barrier to your product spreading through the market like a virus. With 90% margins, you can afford to optimize for ubiquity over unit economics, at least until you achieve market dominance.

The companies that understand this paradox (that high margins enable lower prices, not higher ones) often end up building the most valuable businesses. They sacrifice short-term revenue optimization for long-term market capture, betting that ubiquity beats margin optimization when your costs are near zero.

This is perhaps the most counterintuitive lesson of high-margin SaaS: your pricing strategy should be as much about what you don’t charge for as what you do.

Zone of Genius

I have figured out a lot of the pieces in Education Walkthrough’s operations, yet I am still working on sales. With our emphasis on PLG and organic growth, finding the right fit of a person or an advisor to support us has been more challenging.

This week, I had multiple calls from various sales gurus, coaches, and consultants to try to figure out a solution. All of them blurred together except one. This guy talked about systems and processes, starting by looking at the business holistically and then matching you up with experienced operators (former entrepreneurs) to coach you. He was talking my language.

Halfway through the conversation, he said, “If we do our job right, then the result will be cutting down the time you are doing on sales and giving you more time in your zone of genius.”

My zone of genius. Interesting.

It stuck with me. I had heard the term before, but it had only been a while. I have been thinking about the concept since the call.

Where is my zone of genius? Where do I love to be? 

For me, my passion is in product. It is abundantly clear to the people around me. I love to take a lot of information in from people, the internet, customers, videos, and what you have, then sit on it and synthesize it into insights, pattern matching, or actions. That is what I am good at and where my zone is.

I have learned that things don’t happen immediately in life, so I have learned to let things simmer in my zone, where I can do this process for a long time, then at each juncture when I have an insight, write it down immediately. I need to capture it so I can turn back to it and reflect or use it as a jumping-off point for the future. 

This has become my superpower. My zone of genius. 

If I really did not have to worry about sales or marketing and could just focus on this, would I be happy?

There is value in optimizing for your zone of genius while also spending time outside of your zone. Remaining uncomfortable is one of the greatest tricks of successful people. There is probably a balance here between being inside your zone and outside.

It’s funny what things stick with you from a random call on a Tuesday across all the other things you did during the week.