Many founders mistakenly view freemium as a complete business model. It's actually a top-of-funnel acquisition strategy that replaces marketing spend with a free product to generate leads. The real business model is the subsequent upsell to paid tiers.
Your true cost to acquire a paid customer via freemium isn't zero. Calculate it with this formula: (monthly cost to service a single free user) divided by (free-to-paid conversion rate). This reveals the model's actual financial viability.
In a B2B context, the most effective freemium products don't just offer a limited tool. They act as a diagnostic, giving away value by clearly identifying a painful hole in the user's business—a hole your paid product is designed to fill.