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Pricing models

Seat-based pricing

Charging per user or per licence, the most common model in B2B software.

Seat-based pricing charges per user. It is easy to explain, easy to forecast, and it expands naturally as a customer’s team grows, which is why so much B2B software uses it.

The mechanics that matter are how seats are counted and when. Peak seats in a period, seats at the moment of billing, and named-versus-concurrent licences produce different invoices. Adding a seat mid-cycle triggers proration; removing one usually does not refund until renewal.

Seat pricing is under pressure from AI-assisted software, where value no longer scales with headcount, which is why many products now combine seats with a usage component.

Related terms

  • ARPA (Average Revenue Per Account) MRR divided by the number of active accounts. Also seen as ARPU, where the unit is a user rather than an account.
  • Expansion MRR Additional recurring revenue from existing customers: upgrades, added seats, add-ons and contracted usage growth, excluding anything from new customers.
  • Entitlement What a customer is allowed to use because of the plan they are on: which features, and up to what limits.
  • Proration Charging or crediting for part of a billing period when a subscription changes mid-cycle.