To make sure your pricing and business model work, start by analyzing your competitors. Look at their rates and models. If they’re successful, profitable, and raising funds, mimic their approach. This strategy can provide a solid foundation in the early stages.

Talk with your customers directly. Find out how much they’ll pay. Many businesses fail to build their models based on customer insights. Don’t build your model on what your “ideal” customers will buy, and don’t make assumptions about their willingness to pay: ask them. Some customers will prefer an usage-based model, and others will find a subscription to be easier to manage. Make sure your model aligns with what customers value and what they’re ready to pay for.

Create a basic financial model to see if your unit economics works. Calculate your customer acquisition costs (CAC) and your customer lifetime value (LTV), and make sure your LTV/CAC ratio is attractive (ideally more than three). If your ratio is sub-par, you’re either pricing your services too low or acquiring customers too expensively. If so, move the appropriate dials and make your business model sustainable.