Usable with a quick edit11 of 13 checks passed
The memo is complete, evidence-backed, and directly actionable by the CEO with only minor wording tweaks possible.
Output
Parsewell pricing: an alternative to a flat 30% increase
To: CEO | From: Head of Product
Recommendation
Tom has correctly identified the margin problem but proposes the wrong fix. We don't charge for pages, and pages are the only thing that costs us money. I recommend we keep seats for self-serve, add a page allowance with overage, and price enterprise per page. At today's volumes this takes gross margin from 24% to 42%. Startups pay nothing extra, and margin keeps rising as cost per page falls. A 30% increase reaches 41% on paper, but only if nobody churns and we could reprice contracts in January. We can't. And it leaves the cause in place.
Where the margin went
All figures come from the 30-day export (80 accounts, 27.4M pages, $43,057 revenue, $32,903 cost to serve).
- Enterprise is underwater. It earns $0.00098 per page against a cost of $0.0012, a gross margin of −22%. Northwind and Halden alone lose $4,736 a month.
- Mid-market makes 41%. Three accounts (P, Q, V) lose money because a few seats push heavy volume.
- Startups make 87%. They are not the problem.
Seats don't track cost. Northwind's pages tripled in a year on the same contract. Cost per page falls about 34% a year (10% a quarter), but volume growth of that size outruns it. That is how margin fell from 41% to 24%.
The model
| Segment | Accts | New pricing | Revenue/mo now → new | GM now → new |
|---|---|---|---|---|
| Startup (self-serve) | 50 | $99/seat, 50k pages per seat included, $0.003/page above | $9,999 → $9,999 (no account changes) | 87% → 87% |
| Mid-market (self-serve) | 24 | Same plan | $14,058 → $17,214 (+22%); 14 accounts unchanged, 10 pay overage | 41% → 51% |
| Enterprise (annual) | 6 | $0.0015/page on a committed annual volume, overage at the same rate, unlimited seats, minimum = current contract value | $19,000 → $29,115 (+53%) | −22% → 20% |
| Total | 80 | $43,057 → $56,328 (+31%) | 24% → 42% |
Why this shape:
- Startups: no startup exceeds 50k pages per seat, so the change is invisible to them. That protects the funnel against Formwise at $79.
- Mid-market: overage lands only on the accounts that cost us.
- Enterprise: a single per-page rate with no volume discount, because our cost is linear in pages.
Margin over time: at $0.0015, enterprise margin is 20% at today's cost and about 48% by late 2027 if the cost trend holds. Unlike today, revenue grows with volume.
Competitive position: $0.0015 is deliberately conservative. DocuLens's public price for Northwind's volume would be about $43,000 a month, against $7,230 under this model. We stay the cheapest option for every mid-market account too. Account V (3 seats, 346k pages) would pay $885 with us, $2,197 at Formwise and about $4,650 at DocuLens.
Enterprise renewals
Contracts can't be repriced mid-term. A January increase on "contracts" would reach only Copperfield. We move each account at renewal.
| Account | Renews | Now/mo | New/mo | Change | Approach |
|---|---|---|---|---|---|
| Copperfield | Jan 2027 | $2,400 | $3,570 | +49% | First renewal; prove the motion and refine the talk track |
| Northwind | Feb 2027 | $3,200 | $7,230 | +126% | Decline "same rate"; offer 2 years at $0.0015 then $0.0013 |
| Arcadia | Mar 2027 | $4,500 | $4,965 | +10% | Retention case: hold $54k, cover up to 3.6M pages/mo |
| Halden | Jun 2027 | $2,600 | $5,940 | +128% | Same as Northwind |
| Meridian | Sep 2027 | $3,300 | $3,300 | 0% | Minimum applies; framing benefit only |
| Brightwater | Nov 2027 | $3,000 | $4,110 | +37% | Standard |
Northwind. "Same rate for two years" means unlimited pages for $38,400 a year. If their growth continues, they reach roughly 14M pages a month. Even after two more years of cost decline, that would lose us about $100k a year.
- Offer: two years at $0.0015, stepping down to $0.0013 in year two. This gives them the price certainty they want while we keep a margin on growth.
- Walk-away point: we should be willing to lose them. Northwind and Halden leaving would cut $5,800 a month of revenue but raise gross profit by $4,736 a month. That fact sets our walk-away point; it isn't a threat to put in front of them.
Arcadia already pays $0.00136 per page and is looking at a competitor.
- Offer: hold them at $54k for 12 months covering up to 3.6M pages a month, with $0.0015 above that.
- Discovery: competitors' public prices are far above ours, so we should find out what is really driving the evaluation before assuming it's price.
Phasing. Full enterprise effect arrives with the November renewal. Margin climbs through 2027 rather than jumping in January.
Self-serve rollout
- January: new sign-ups get the new plan. Existing accounts get an in-dashboard usage meter showing their allowance.
- Notice: existing accounts get 60 days' notice, with overage billing from April.
- Personal outreach to five accounts: I, P, Q, T and V see increases of 58% to 198%. We contact each one and offer a committed annual page pack at $0.002.
- Worst case: if all five churned, we lose $2,433 a month of new gross profit. Blended margin would still be about 41%.
The price test
The test doesn't support a 30% increase, for the following reasons.
- The split is broken. It was meant to be 50/50 but came out 1,240 vs 870 visitors (59/41). The chance of that happening randomly is effectively zero (χ² ≈ 65). Something in assignment or tracking failed, possibly losing B-arm visitors who bounced. Until that is explained, neither arm's numbers can be trusted.
- "Not significant" doesn't mean "no effect." With 104 conversions, the 95% confidence interval on the difference runs from −2.0 to +1.7 points. The data are consistent with a 40% drop in conversion.
- The timing and measure are weak. It ran for two holiday weeks and measured first payment only, not retention or seat growth.
- It covered the wrong customers for this decision. It tested new self-serve sign-ups at $129. It says nothing about existing customers or enterprise contracts. Enterprise buyers will ask for the evidence, and citing this test for their increase would hurt our credibility at exactly the renewals that matter.
At face value, B shows higher revenue per visitor ($6.23 vs $4.95). That makes the test worth rerunning, not acting on. A valid rerun needs:
- a fixed split;
- four or more weeks;
- 60-day paid retention as the success measure;
- the new allowance plan as one of the arms.
Compared with a flat 30%
| Flat +30% (as proposed) | Flat +30% (what January allows) | This model | |
|---|---|---|---|
| Gross margin today | 41% | 36% | 42% |
| Northwind / Halden | Still lose $1,624 / $1,372 a month | Unchanged losses | 20% margin |
| As pages grow | Margin erodes again | Margin erodes again | Margin holds and rises as costs fall |
| Startups (87% margin, most price-sensitive) | +30% | +30% | Unchanged |
| Churn assumed | None | None | Downside quantified above |
Decisions needed
- Approve the model and the $0.0015 enterprise rate.
- Authorize the walk-away position on Northwind and Halden.
- Ask Growth to diagnose the split failure before any test result is cited.
I'd like Tom in the room for the first two. His margin target is right, and this model reaches it faster and keeps it.
Grades and run details
Decision model 77 · LLM judge 100
Decision model checks
- failUses the supplied evidence correctly26%
- passAddresses the actual decision98%
- passRespects explicit constraints28%
- passIdentifies material uncertainty87%
- partialAvoids unsupported claims30%
- passProduces the required deliverable76%
- passFixes the value metric90%
- passDoesn't trust the price test100%
- passPlans the renewals100%
- passEach tier for a different buyer90%
- failGets the base of every number right71%
- partialPriced on willingness to pay28%
- passMoves existing customers fairly100%
Run
- Run
- #1
- Time to output
- 2.9 min
- Submitted
- 5 Oct 2026