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RAG Break-even Price per Seat

Break-even seat price is the minimum monthly price required to avoid negative gross margin for your retrieval-heavy agent, copilot, or AI feature.

Question

What monthly seat price do I need for a target gross margin?

Quick answer

Formula: required_price = cost_per_user_month / (1 - target_margin_pct / 100)

  • Assumption: target margin is gross margin, not contribution margin.
  • Assumption: cost per user/month already includes all major RAG components.
  • Assumption: pricing is per active paying user per month.

Example: if cost per user/month is $9 and target margin is 80%, required price is $45.

Decision Workflow

  • Estimate per-user monthly cost under p50 and p90 usage.
  • Choose a margin floor (for example 70% gross margin).
  • Compute required monthly seat price: cost / (1 - margin).
  • Validate the price against comparable market offerings.

Related reads

Open companion tool: Break-even Price

Baseline inputs tool: AI Workflow Cost