Last updated on Tuesday, April 29, 2025
Usage-based billing is quickly becoming the dominant revenue model for companies. From cloud infrastructure to SaaS, media, and AI platforms, companies are increasingly adopting pricing strategies that tie revenue directly to customer usage.
In this guide, we’ll explore what usage-based billing is, why it’s gaining traction, the operational challenges it introduces, and why forecasting is such a challenge with this model.
Usage-based billing (also known as consumption-based billing) is a pricing model where customers pay based on how much of a product or service they use. Unlike subscription models that charge a flat recurring fee, usage-based pricing flexes with consumption. The more a customer uses, the more they pay. If they use less, they pay less.
Common examples include:
Usage-based billing aligns revenue with value. Customers only pay for what they use. Businesses grow alongside engagement. It’s a pricing model built for transparency, scalability, and modern buying behavior.
Several things are accelerating the shift toward usage-based billing:
Buyers expect flexibility. They want to start small, try products without long-term contracts, and pay proportionally as they scale. Usage-based billing supports this expectation without friction.
UBB enables companies to land and expand. Customers can begin with low-volume usage, then scale over time without renegotiating pricing. This approach supports high-velocity go-to-market motions.
Because pricing reflects usage, customers feel confident they’re paying for actual outcomes. For vendors, this creates a strong correlation between product engagement and revenue.
Unlike seat-based pricing, usage has no artificial ceiling. As customers grow or embed your product more deeply into their workflows, revenue increases organically.
These benefits have made usage-based billing a powerful strategy for SaaS and digital-first companies looking to drive sustainable growth.
There is no one-size-fits-all approach. Companies typically adopt one or more of the following models:
Choosing the right model requires a deep understanding of customer behavior, cost structures, and product value metrics.
While the benefits are significant, usage-based billing introduces new challenges across every layer of the business. Unlike traditional models, UBB touches a wider set of systems and stakeholders.
To implement usage-based billing, companies must build or integrate systems for:
Each of these components must work together, and when a company introduces new pricing models or products, the entire billing stack may need to adjust.
Billing is a shared responsibility across engineering, product, finance, sales, marketing, and analytics. Each group has different needs:
Misalignment across these teams can stall product launches, slow down revenue, or compromise customer experience.
Forecasting becomes much harder in usage-based models. Unlike subscriptions with fixed recurring revenue, usage-based revenue is tied to customer behavior that changes in real time.
Key forecasting challenges include:
As usage changes, so does revenue. But many teams don’t discover this until it’s too late. Forecasting tools built for subscription models fail to capture this complexity.
While metering and invoicing typically receive the most attention, forecasting is a large risk in usage-based billing.
Finance and RevOps teams are often left building manual models in spreadsheets, disconnected from CRM, billing platforms, or actual usage trends. These models quickly become stale, especially as customer behavior shifts.
Without accurate, dynamic forecasting:
For usage-based billing to be successful at scale, forecasting infrastructure must evolve alongside billing operations.
Modern SaaS companies need forecasting systems that operate at the speed of product adoption and customer usage. These systems must:
revVana delivers this capability by embedding forecasting inside Salesforce, making real-time, usage-aware revenue models accessible to every stakeholder. Rather than reactively updating spreadsheets, teams can proactively understand how changes in consumption impact top-line revenue.
Usage-based billing is not just a pricing decision. It redesigns how companies acquire, expand, and retain customers. It increases flexibility but also grows complexity.
Success with usage-based billing requires more than flexible pricing. It demands operational alignment, real-time visibility, and forecasting accuracy.
As more SaaS and digital companies adopt usage-based models, those that invest in scalable forecasting will be positioned to plan, grow, and lead.
Forecasting revenue is never easy, but for companies with usage-based business models, it’s especially complex. Traditional forecasting approaches often break down when revenue isn’t tied to fixed subscription fees or deal stages, but instead to how much your product is actually used.
Consumption-based pricing is quickly becoming a powerful approach, providing flexibility that allows customers to pay only for the resources they use—whether it’s storage, API calls, or CPU hours. Known as pay-as-you-go, metered billing, or usage-based pricing, this model is increasingly popular across industries like cloud computing, IaaS, SaaS. While it offers clear benefits for both users and providers, this flexibility brings unique challenges to the forefront, particularly around revenue predictability and effective resource allocation.
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