How to Implement Usage-Based Billing for Faster Monetization in 2025
Joshua D'Costa
Growth & Marketing
Aug 20, 2025
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5
min
Usage-based billing sometimes called metered billing is becoming a growth accelerator for SaaS and AI startups. Instead of flat subscription fees, companies charge customers based on actual usage like API calls, data processed, compute time, etc.
In fact, A 2025 industry study saw 85% of software firms adopted metered pricing. AI and cloud infrastructure are key drivers, AI market (projected at $244 billion by 2025), “pay-per-usage” lets startups cover the high costs of compute and automatically scale revenue as customers consume more. Usage-based billing is a proven way to accelerate SaaS monetization and stay competitive in 2025.
Decide If Metered Billing Fits Your Product
Not every business should go all-in on metered billing. Start by asking:
Is there a clear usage metric?
Do costs or value scale with usage?
Will customers pay for usage instead of seats?
If you answer “yes” to most, usage pricing may fit. Many startup founders find it best to roll it out early. Industry experts recommend evaluating this before you reach $5M–$10M in revenue rather than later, since changing models after scale is hard.
For example, emerging SaaS firms in the $3–25M ARR range are already eyeing usage models as key to growth.
Many companies start with a hybrid model (subscription + usage) before moving to pure pay-as-you-go. In fact, 46% of businesses take a hybrid approach. For Example platforms like Dodo payments, Hubspot offer Hybrid pricing. It provides a smooth transition for customers. It tames pure metered bills while still rewarding growth.
Consider usage-billing early if it matches your product’s value metric; otherwise, start with a hybrid plan and evolve as you learn.
Ways to Implement Usage-Based Billing for Faster Monetization
Below are key steps to put a usage-based model in place without getting bogged down in custom development:
1. Identify the Right Value Metric
Choose a unit that clearly reflects customer value. Common metrics include API calls, data volume (GB/TB), active users, messages sent, etc. The metric should scale with both costs and customer value.
For example, an AI or analytics service might charge “per 1,000 tokens” or “per query”. For instance, Twilio charges per SMS/API call, and cloud databases bill per GB/month.
Even a percentage-of-revenue model is a form of usage pricing – e.g. Dodo Payments takes a cut of transaction volume.
Pick one primary metric to start, then test if it drives growth. You can always iterate later. The goal is simplicity and transparency. Customers should understand that each unit they use adds to the bill, and it directly corresponds to their benefit.
2. Use an Outsourced or Pre-Built Billing Platform
Building a usage-metering and billing engine from scratch can take months. Instead, leverage automated billing software or platforms. Modern billing systems handle usage events, tier definitions, invoices, proration, tax compliance, and more. This saves time and avoids errors
For example, companies report a 75% reduction in invoice processing time after switching to automated billing. Platforms like Dodo Payments, whose APIs natively support hybrid subscription and usage-based billing can define usage tiers, apply overage charges automatically, and even update invoices without manual coding.
An automated billing system lets you deploy usage plans in days instead of months, freeing your team to focus on product development rather than reinventing the billing wheel.
3. Automate Tracking & Alerts
Accurate usage tracking is critical and tricky in a metered model. Instrument your product to log every usage event in real time. Feed those events into your billing engine or data warehouse.
Set up internal alerts like notify finance if a customer’s usage spikes unexpectedly and customer-facing usage dashboards or notifications.
Accurate monitoring of usage in real time is critical, but operationally challenging. To avoid billing disputes, give customers visibility into their consumption – for example, show them how much of their plan they’ve used.
Best practice: notify customers when they hit, say, 80% of their included usage to prevent surprises.
In addition, integrate with alerting or CRM tools so your team can proactively manage high-usage accounts. Don’t forget, without solid tracking, usage billing can lead to missed revenue or angry customers, so investing in automation upfront pays off.
4. Start Simple and Iterate
Launch with a straightforward pricing framework, then refine based on data. For example: Offer a free or low-cost tier with limited usage plus one metered plan. Gather usage data and customer feedback, then tweak unit prices, add new tiers, or introduce overage caps as needed.
Keep the initial model easy to understand by avoiding confusing multi-metric bundles. Plan to experiment, as most companies continually iterate their usage pricing. SaaS firms are still tweaking their usage-based pricing schemes, reflecting that it’s an ongoing process. Use metrics like ARPU (average revenue per user), churn rate, and expansion revenue to guide you.
If many customers hit your top tier, consider adding a higher one; if adoption is slow, you might lower per-unit prices. Small A/B tests can quickly reveal what the market tolerates. Over time, these data-driven refinements will optimize monetization without overwhelming customers.
Benefits:
Aligns revenue with customer value – Users pay only for what they consume, boosting satisfaction and trust.
Unlocks natural growth – As customer usage (and success) expands, so does revenue per account.
Lower upfront cost – Easier lead generation and sales because customers avoid paying for unused capacity.
Scalable pricing model – The model automatically adjusts with usage, making it easier to scale revenue.
Clear upsell signals – When customers approach usage limits, it creates opportunities for natural plan upgrades.
Customer-friendly approach – Removes friction and encourages product adoption, accelerating expansion revenue.
Challenges:
Market volatility raises risk — Fast shifts in valuations, layoffs, and AI-driven disruption mean companies must prioritize predictable cash and profitability, which pure usage models can make harder.
Adoption is still a mix — While many firms are trying UBP, lots are still testing, so you’re joining a field of experimentation and uncertainty.
Pure pay-as-you-go is uncommon — only a minority adopt fully metered models; nearly half prefer hybrid plans, which shows pure UBP can be risky or unsuitable for many products.
Pricing gets complex fast — defining metrics, tiers, discounts and overages adds design complexity and customer confusion if not done clearly.
Operational and finance overhead — irregular invoices, revenue recognition, and reconciliations increase workload for finance and ops teams.
Forecasting becomes harder — usage-driven revenue is more volatile, making runway and budgeting tougher to predict.
Wrapping Up
Usage-based billing is great for SaaS monetization in 2025. It’s especially fitting for AI-powered and cloud-native products where consumption is a natural value lever.
The key is to align price with value: customers pay for what they use, and you only collect revenue when you provide value. If this approach sounds promising, take action now.
Explore Dodo Payments’ documentation to see how you can launch metered billing via APIs and integrations and begin converting usage growth into faster revenue growth.
