Mila

Worth measuring rather than assuming in either direction. I have seen it go the other way in a product where the heavy free accounts were teams evaluating properly. The point stands though: it is a number you can have and most people are arguing about it without one.

Start with the number you have never worked out: what does a free account cost you per month, on average and at the top end?

Take the bill, attribute it, and produce two figures. The average tells you what the tier costs in total. The top end tells you about the accounts eating your margin, and there is usually a very long tail: a handful of accounts consuming more than everybody else combined, which matches what you are seeing.

Then decide the thing you skipped: what is the free tier's budget? Pick a number, monthly, that you are willing to spend on acquisition. Free users are a marketing cost and treating them as one makes every subsequent decision straightforward.

With those two numbers, the limits follow arithmetically. Budget divided by cost per user tells you how many free accounts you can carry, and that tells you where the caps need to be.

Also worth measuring: what fraction of paying customers came through the free tier? If it is most of them, the tier is working and it is worth paying for. If almost all your customers arrived and paid without using it, you are funding something that is not converting, and that changes the answer entirely.

Most people have never checked, and it is the number that decides whether to fix the tier or shrink it.