International Pricing Strategy for UK SaaS: Currency, FX Risk and Runway Forecasting

International Pricing for UK SaaS: Currency Strategy and FX Risk

For a UK-based SaaS company, seeing strong sign-ups from the US and Europe is a clear sign of success. But as that first wave of dollar and euro revenue hits your Stripe account, it brings a cascade of critical questions. How do you set SaaS prices in euros and dollars from the UK without creating an accounting nightmare or exposing your margins to constant currency risk? When future subscription revenue converts back to GBP at uncertain rates, protecting your runway becomes paramount. For early-stage startups without a full-time finance team, moving from a simple GBP model to a multi-currency strategy can feel daunting. The key is to approach it methodically, balancing customer experience with operational reality and mitigating the financial risks from the start.

The Foundational Decision: Should You Price in Foreign Currencies at All?

The first question is whether the operational complexity of multi-currency pricing is worth the potential upside. For many pre-seed and seed-stage companies focused on finding product-market fit, the answer is often no. Sticking with a single GBP price point is simpler, reduces administrative overhead, and allows you to dedicate all your resources to improving your product and talking to customers. The simplicity of a single currency model cannot be overstated in the early days.

The trigger to seriously evaluate a change comes when your international revenue grows to a meaningful portion of your business. A practical threshold to consider adopting a multi-currency approach is when international revenue consistently exceeds 10-15% of your total Annual Recurring Revenue (ARR). At this point, the benefits of a localised customer experience start to outweigh the hassle of implementation. The conversation naturally shifts from “if” to “how.”

The primary benefit of local currency pricing is reducing purchase friction for your customers. A potential US customer seeing a price in GBP must mentally convert it to dollars, an extra step that can cause hesitation. They also understand that their credit card statement will fluctuate each month depending on their bank's exchange rate, creating unpredictability. This adds a small but meaningful psychological barrier to purchase. Pricing in their local currency, such as a clean $49 per month, feels familiar, professional, and predictable. This is not just a cosmetic change; according to internal data from Price Intelligently, localised pricing can increase revenue per customer by 11-18%. The reality for most pre-Series A startups is pragmatic: stick to GBP until international traction forces your hand.

The Three International Pricing Models for Cross-Border SaaS Billing

Once you commit to pricing internationally, you have three core models to choose from. Each represents a different trade-off between customer experience, operational simplicity, and how foreign exchange (FX) risk is allocated between you and your customer. Understanding these models is the first step in building a robust international SaaS revenue strategy.

Model 1: GBP Everywhere (Customer Bears FX Risk)

This is the simplest model to implement. You set all your prices in GBP, and your payment processor, like Stripe, shows the customer an estimated price in their local currency at the point of checkout. The final conversion is handled by the customer's card-issuing bank.

• Pro: Zero FX risk for your company. You receive the exact GBP amount you priced for every single time, making revenue forecasting straightforward.
• Con: All FX risk is passed to the customer. Their monthly subscription fee will fluctuate, which can lead to confusion, support tickets, and ultimately, churn. This model creates the most friction for international buyers and can make your pricing appear less professional than competitors who price in local currency.

Model 2: Fixed Foreign Prices (Company Bears FX Risk)

This is the most common and balanced approach for UK SaaS companies expanding into the US and Europe. You set a fixed, psychologically-friendly price in the target local currency, such as $99 per month or €89 per month. This price remains stable for the customer.

• Pro: This provides an excellent customer experience with clear, predictable pricing, removing the conversion friction and uncertainty seen in Model 1.
• Con: Your company now bears all the FX risk. The amount of GBP you receive for each subscription will change as exchange rates move, creating volatility in your revenue and gross margins.

A scenario we repeatedly see is a UK SaaS company setting a plan at $99 per month when the GBP/USD exchange rate is 1.25, expecting to receive £79.20. If the pound weakens against the dollar and the rate moves to 1.35, that same $99 subscription is now worth only £73.33. Conversely, if the pound strengthens to 1.15, your revenue from that subscription becomes £86.08. This volatility directly impacts your financial planning.

Model 3: True Localised Pricing (Strategic and Complex)

This is the most advanced strategy, moving beyond direct currency conversion. Instead of just translating your GBP price, you conduct detailed research in each target market to determine the optimal price point based on local value perception, competitive landscape, and willingness to pay. A product priced at £100 in the UK might be priced at $150 in the US and €120 in Germany, reflecting different market dynamics and economic conditions.

• Pro: Maximises revenue potential in each region by aligning price with local value. This is the gold standard for mature, global companies.
• Con: Requires significant market research, dedicated pricing resources, and operational complexity to manage and maintain different price points across regions. This is generally not feasible for early-stage startups.

Part 1: How to Implement a Fixed Foreign Pricing Model

For most scaling UK SaaS businesses, Model 2 offers the best balance. Implementing a fixed foreign price model requires setting up the right infrastructure to invoice, collect, and reconcile funds without creating accounting chaos. Your technology stack is central to making this process manageable and scalable.

Step 1: Choose Your Billing Platform

First, you need a billing platform that natively supports multi-currency invoicing. Leading options include Stripe, Chargebee, and Paddle. It is crucial to understand the distinction between a pure payment processor like Stripe and a Merchant of Record (MoR) like Paddle. With Stripe, you have more control and typically lower fees, but you are directly responsible for calculating, collecting, and remitting sales taxes in every jurisdiction you sell into, such as US sales tax or EU VAT. For VAT rules on services, see the official guidance on the VAT place of supply. An MoR, by contrast, acts as a reseller of your software. They handle all payment processing, tax compliance, and fraud prevention for a higher transaction fee, abstracting away immense complexity.

Step 2: Set Up Multi-Currency Bank Accounts

Next, you will need multi-currency bank accounts to hold the USD and EUR you collect. Using your standard GBP business account will force an automatic currency conversion on every transaction, often at poor exchange rates set by the bank. Services like Wise Business or Revolut Business are specifically designed for this purpose. They allow you to open local currency accounts (e.g., a US account with an ACH routing number) to receive and hold foreign currency. This gives you the flexibility to convert it back to GBP when the rates are more favourable, or to use the funds directly for foreign currency expenses.

Step 3: Configure Your Accounting Software

In your accounting software, which is typically Xero for a UK company, you will set up these new bank accounts and enable multi-currency features. This is where you will encounter the accounting concept of “unrealised gain or loss.” For example, imagine you are holding $10,000 in your Wise USD account. At the end of month one, the GBP/USD rate is 1.25, and Xero values this asset at £8,000 on your balance sheet. At the end of month two, the rate moves to 1.30. The same $10,000 is now valued at only £7,692. Your accounting software will automatically post a non-cash “unrealised foreign currency loss” of £308 to your profit and loss statement. This is not a cash loss; it is an accounting entry to reflect the current GBP value of your dollar holdings. A real, or "realised," gain or loss only occurs when you physically convert the currency. The official guidance on this is found in FRS 102 guidance, which governs foreign currency translation under UK GAAP.

Part 2: FX Risk Management for SaaS Companies

Once you are pricing in foreign currencies, you have actively taken on foreign exchange risk. Your primary concern is protecting your gross margins and overall financial plan from unfavourable currency swings. For most startups, risk mitigation is typically passive rather than active, focusing on operational tactics rather than complex financial instruments.

Passive Risk Management Strategies

Passive risk management involves two key tactics. The first is conducting periodic price reviews. You should establish a clear internal threshold that triggers a review of your fixed foreign prices. A common rule is to formally review prices when a currency exchange rate has moved persistently by more than 10-15% over a period of three to six months. For instance, if the pound has weakened significantly against the dollar for several consecutive months, you may need to increase your USD price for new customers to protect your target GBP revenue per account. Existing customers are often grandfathered in at their original price to avoid dissatisfaction.

The second, and more powerful, tactic is creating a natural hedge. This is known as a “natural hedge.” This strategy involves matching your expenses to your revenues in the same currency. If you have significant USD revenue from US customers, use those funds directly from your USD bank account to pay for USD-denominated costs. Common examples include your AWS hosting bill, subscriptions to US-based software like Salesforce or HubSpot, or digital advertising spend on platforms like Google and LinkedIn. By matching revenues and costs in the same currency, you reduce the amount of money you need to convert back to GBP, thereby reducing your exposure to FX volatility.

Active Risk Management Strategies

Active risk management involves using financial instruments like forward contracts to lock in a future exchange rate. This provides certainty over the GBP value of future foreign income. However, for most startups, this is unnecessary and adds complexity. The administrative burden and cost of setting up these financial products often outweigh the benefits. The threshold for when active hedging becomes a board-level conversation is typically when foreign-denominated revenue is substantial (e.g., over £5 million ARR) and a 10% swing in a key currency pair could materially impact the company's ability to execute its financial plan.

Part 3: How to Forecast ARR and Runway with Multiple Currencies

One of the biggest pain points for founders and their finance leaders is accurately forecasting ARR and cash runway when a portion of future revenue is in currencies with uncertain future value. How do you forecast your runway in GBP when you do not know what your future dollar revenue will be worth? The wrong approach is to use the live spot rate from a currency website, as it is far too volatile for long-term planning. The answer is to be conservative and systematic.

Your spreadsheet-based financial model, which is almost certainly denominated in GBP, needs a reliable and consistent methodology for converting future contracted USD and EUR revenue. What founders find actually works is to use a conservative, buffered exchange rate for all forecasting purposes. This approach is aligned with the principles outlined in accounting standards like IAS 21, which provide authoritative guidance on currency translation.

The recommended methodology is straightforward:

1. Calculate a historical average: Look at the average exchange rate for each currency pair (e.g., GBP/USD) over the last 3 to 6 months. This smooths out daily volatility.
2. Apply a conservative buffer: Subtract a buffer of 5-10% from the historical average to protect against unfavourable movements. This buffer acts as a margin of safety in your financial plan.
3. Use this rate for all forecasts: Apply this single, buffered rate consistently across your financial model to convert all future foreign currency revenue into GBP.

For example, let's say your US ARR is projected to be $240,000. The average GBP/USD exchange rate over the last six months was 1.25. To be conservative, you apply an 8% buffer, making your forecasting rate 1.15 (1.25 * 0.92). In your GBP-based model, you would forecast this $240,000 of revenue as £208,695 ($240,000 / 1.15). This approach builds a cushion into your financial plan and helps prevent you from overstating your projected GBP revenue and cash runway, ensuring you are planning for a more cautious scenario.

Practical Takeaways for Each Growth Stage

Navigating international pricing is a process that should align with your startup's growth stage and operational capacity. Don't over-engineer it early on. The primary goal is to match your currency strategy to your commercial momentum and risk tolerance, evolving your approach as your business scales.

• Pre-Seed/Seed Stage: Keep it simple. Price everything in GBP until your international revenue consistently exceeds 10-15% of your total ARR. Your focus should be on product development and customer acquisition, not foreign exchange management. The operational overhead of multi-currency at this stage is a distraction.
• Series A Stage: Once international traction is proven, implement the “Fixed Foreign Prices” model for key markets like the US and the EU. Set up multi-currency accounts with a provider like Wise or Revolut. Actively pursue the “natural hedge” strategy by identifying and paying for foreign bills with your foreign currency revenue.
• Series B Stage and Beyond: Once foreign-denominated ARR becomes substantial (e.g., over £5 million), the conversation can evolve to more sophisticated risk management. This is the time to regularly review pricing against persistent currency swings of 10-15%, as discussed in the price increase playbook. You may also begin discussions with your board and CFO about whether more active hedging strategies are warranted.

For all stages, financial forecasting discipline is key. Always use a conservative, buffered exchange rate in your financial models to ensure your runway calculations are realistic and can withstand currency shocks. This prudent approach to planning is a hallmark of strong financial leadership. For more related guidance, see the broader pricing strategy hub.

Frequently Asked Questions

Q: When should I update my fixed foreign prices due to currency fluctuations?
A: A good rule of thumb is to review your prices when an exchange rate has moved persistently by more than 10-15% over a 3-6 month period. This avoids knee-jerk reactions to short-term volatility. Changes should typically apply only to new customers to avoid alienating your existing user base.

Q: What is the main difference between Stripe and a Merchant of Record like Paddle?
A: Stripe is a payment processor; you are responsible for calculating, collecting, and remitting all sales taxes (like US sales tax or EU VAT). A Merchant of Record (MoR) like Paddle acts as a reseller. They handle all tax compliance, billing support, and payment logistics on your behalf for a higher fee, simplifying your operations.

Q: Can I use my standard UK business bank account to receive dollars or euros?
A: While technically possible, it is not recommended. Your bank will likely convert the funds to GBP immediately at an unfavourable exchange rate and may charge high fees. Using a dedicated multi-currency account from a service like Wise or Revolut gives you control over when you convert and at much better rates.

Q: How does multi-currency pricing affect revenue recognition for my SaaS?
A: Under accounting standards like FRS 102, revenue should be recognised at the exchange rate on the date of the transaction. The subsequent holding of foreign cash creates unrealised gains or losses on your balance sheet as rates fluctuate, which are accounting entries, not cash impacts, until you convert the currency.