How to build a recurring annual price increase into your SaaS

Executive overview

Many SaaS founders avoid raising prices until the gap between old and new customers becomes painful, then face a large, churn-inducing jump. A better approach: commit to a small, predictable annual increase — communicated upfront — that compounds quietly and keeps pricing aligned with value delivered.

James Kennedy, founder of Procurement Express (~$2M ARR), has done this every September for three years at 8%, telling customers from day one it is coming.

Small, expected price increases compounding annually beat large, infrequent ones every time.

Five benefits of an annual price increase

1. Avoids the painful "catch-up" increase — letting the gap grow means a 20%+ jump is eventually required, which drives meaningful churn.
2. Customers expect it — a $100 → $110 move is rounding error to the customer but multiplied across all accounts it materially lifts MRR.
3. Creates a predictable revenue bump you can plan against — hiring, tooling, or runway decisions become easier when you know September means more MRR.
4. Naturally churns inactive users — the only customers who leave are those not getting value; this keeps reported MRR honest.
5. Forces internal accountability — knowing you must justify the increase in an email every year focuses the team on shipping meaningful improvements.

The one reason to be careful

• Sustained annual increases can drift you upmarket without a deliberate decision.
• Customers who joined because you were the cheap option will age out over time.
• At 8% per year this is slow, but you must track where you sit relative to competitors and your target ICP.
• If your strategy depends on undercutting an incumbent, recurring increases undermine it.

How Procurement Express runs the process

• All customers are on month-to-month terms of service, not custom annual contracts.
• New customers signing up within ~two months of September get the current year's pricing locked for an extra year.
• The price increase email is plain and direct: subject line is a variation of "Our smallest ever price increase and 10 new features we made for you this year."
• The email lists the exact dollar change (e.g. $33 → $35 per user per month) and recaps what was shipped that year.
• Churn spikes modestly in the following month, but net MRR is always positive.

Using the deadline as a sales tool

• The upcoming September date gives sales reps a genuine, non-manufactured reason to push for a decision.
• "Sign before July and you lock in current pricing for a year" is true — no fake urgency.
• Helps close deals that have stalled in procurement cycles.

Why price matters less than perceived value in mid-market

• Procurement Express sits on $3B in annual spend data and sees buying decisions up close.
• In a 50–500 employee company, the actual dollar amount rarely drives the final decision.
• The buyer must justify the purchase to someone else — your job is to give them a compelling justification, not a lower price.
• Discounting signals low confidence in your product and competes on a dimension where you can always be undercut.
• One year after purchase, a customer who got value will not balk at a small increase; one who did not was a churn risk regardless.

Wider context: rising acquisition costs make pricing discipline essential

• Ad spend, Capterra bids, and SEO competition have all increased; CAC rises every year.
• If your ACV is not growing, your unit economics compress over time.
• Funded competitors can temporarily suppress prices and damage bootstrapped businesses that compete on price alone.
• Moving upmarket gradually — via annual increases — can be a deliberate, defensive strategy rather than an accident.