How to Design a SaaS Database

Should I create a new database for each company?

Yes - Don Dickinson was on the money. However, see a refinement below.

Or should I use one database with tables that have a prefix of the company name?

Lord no! Changing your database queries for different for client would make you go insane! Also, you'd almost certainly run dynamic SQL (where the table name is changed in code before running the query), which would harm performance as most servers like to cache query plans and interim results - this doesn't work if the table names keep changing.

Or should I Use one database with one of each table and just add a company id field to the tables?

You might want to do this if you want to have some kind of scalable model for your customers. Whilst provisioning a new database for each customer gives you lots of flexibility, it also involves costs and complexity. You have to create a new backup schedule, have a lifecycle model for dealing with expired customers etc.

So, you might say that "free trial" and "bronze" customers are all lumped into a single database, using the company id to separate them out; "silver" users get their own database (but you still keep the customer_id field in the schema, so you don't have to change queries between two levels of customer), and "gold" customers get their own database server.

I did something similar a few years ago at a SaaS company - and customers are typically happy to have an upgrade path on infrastructure (read: performance and resilience) as well as features.

faced with a similar situation about 10 years ago, we opted for a database per client. we have hundreds (not thousands) of clients. looking back it was one of the best decisions we made. backups are easy. copying a single client to our office for analysis is easy (just take the last backup). scaling is easy (moving a single big client to a different server can free up resources on a stressed sql server). joel & jeff had a discussion about this on a stack overflow podcast (not a recent one) and joel did the same thing i do ... each client gets their own database. database purists will often argue for lumping everyone into one db, but i would never do that.

-don