SAAS Economics with Michael Alt

In this episode of the SAAS Operators Podcast, we sat down with Michael Alt to talk about the economics of building and running software. We talk about usage based pricing for ecommerce SAAS, why it feels great in November and awful in February, and how order volume, support load, and infra change your cost to serve each customer. Michael explains what happens when your COGS is mostly cloud and AI, why balance sheet funded startups can ignore gross margin for years, and why bootstrapped teams do not have that luxury.

We talk about the quiet tax of bad decisions, how indexes, data models, and reporting layers can swing profitability, and why most brands are still planning nine figure supply chains in Google Sheets. The conversation shifts into copycats, why you should study the people copying you, and how to use bigger players as a very expensive R&D lab. Michael describes how new platforms could feasibly beat Shopify and WordPress, the case for focused vertical products, and how to build in a world where a customer comment in Slack can turn into a ticket, a code change, and a pull request without a meeting.

00:00 Navigating Usage-Based Pricing 03:00 Rethinking Pricing Models 05:57 The Challenge of Software Pricing 08:59 Evaluating Software Value 12:00 Infrastructure Costs and Efficiency 14:52 Balancing Cost and Growth 18:10 The Impact of VC Perspectives on Pricing 26:34 Infrastructure Costs and Business Performance 29:03 The Challenge of Copycats 31:41 Navigating Competition in Software 37:30 The Role of AI in Software Development 50:00 The Future of Purpose-Built Software