Read on Twitter
1/n
The term “SaaS” was coined by John Koenig for the SDForum Software as a Service Conference in March of 2005 and has become industry adopted, generally replacing the earlier terms “On-Demand” and “ASP”(Application Service Provider) also known as subscribeware or rentware.
The term “SaaS” was coined by John Koenig for the SDForum Software as a Service Conference in March of 2005 and has become industry adopted, generally replacing the earlier terms “On-Demand” and “ASP”(Application Service Provider) also known as subscribeware or rentware.
2/n
SaaS is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. SaaS apps are typically accessed by users using a thin client, e.g., via a web browser.
SaaS is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. SaaS apps are typically accessed by users using a thin client, e.g., via a web browser.
3/n
SaaS has become a standard delivery model for many business applications, including office software, messaging software, payroll processing software, DBMS software, management software, accounting, collaboration, CRM, and many more.
SaaS has become a standard delivery model for many business applications, including office software, messaging software, payroll processing software, DBMS software, management software, accounting, collaboration, CRM, and many more.
4/n
Market size of SaaS
According to Statista estimate, the total market size of the SaaS business is grown from $5.56-billion from 2008 to $157-billion in 2020.
Market size of SaaS
According to Statista estimate, the total market size of the SaaS business is grown from $5.56-billion from 2008 to $157-billion in 2020.
5/n
Why it is taking over the world?
Why it is taking over the world?
5(a)/n
Customers love SaaS because it “just works.” There is typically nothing to install to access it. No worry of Hardware failures and operations errors, which are extraordinarily common among machines that are not maintained by professionals.
Customers love SaaS because it “just works.” There is typically nothing to install to access it. No worry of Hardware failures and operations errors, which are extraordinarily common among machines that are not maintained by professionals.
5(b)/n
Developers love SaaS principally because of the delivery model, not the billing model. Most SaaS is developed continuously and runs on the companies’ infrastructure which makes it easy for developers to debug the process for customer support cases.
Developers love SaaS principally because of the delivery model, not the billing model. Most SaaS is developed continuously and runs on the companies’ infrastructure which makes it easy for developers to debug the process for customer support cases.
5(c)/n
Businesses and Investors love SaaS because of the economics of SaaS is attractive. Revenue from SaaS is generally recurring and predictable; this makes cash flows in SaaS businesses impressively predictable, which allows businesses to plan again them.
Businesses and Investors love SaaS because of the economics of SaaS is attractive. Revenue from SaaS is generally recurring and predictable; this makes cash flows in SaaS businesses impressively predictable, which allows businesses to plan again them.
6/n
What is the Business model of SaaS?
What is the Business model of SaaS?
6(a)/n
Recurring payments- In SaaS, clients buy software on the subscription bases. So, you will have to worry about getting payments every month/year as opposed to only once. Recurring payments take the form of monthly recurring revenue(MRR).
Recurring payments- In SaaS, clients buy software on the subscription bases. So, you will have to worry about getting payments every month/year as opposed to only once. Recurring payments take the form of monthly recurring revenue(MRR).
6(b)/n
Heightened customer retention- Businesses care about customer retention, but in SaaS it becomes more important because that is the only thing which makes you afloat. Thus, the SaaS business model puts tremendous value on cultivating customer relationships and upselling.
Heightened customer retention- Businesses care about customer retention, but in SaaS it becomes more important because that is the only thing which makes you afloat. Thus, the SaaS business model puts tremendous value on cultivating customer relationships and upselling.
6(c1)/n
Consistent updates- Existing SaaS customer spends more, on average than a new customer, and more than seven times more likely to churn(leave your business) to go to a competitor because of poor customer service than they are for a better product.
Consistent updates- Existing SaaS customer spends more, on average than a new customer, and more than seven times more likely to churn(leave your business) to go to a competitor because of poor customer service than they are for a better product.
6(c2)/n
So, A regular touch with the user is more important in SaaS, to keep customer retention high.
So, A regular touch with the user is more important in SaaS, to keep customer retention high.
7/n-
What are the different key metrics of SaaS?
What are the different key metrics of SaaS?
7(a)/n
Lifetime Value(LTV)- LTV is an estimate of the average gross revenue that a customer will generate before they churn(cancel)
Lifetime Value(LTV)- LTV is an estimate of the average gross revenue that a customer will generate before they churn(cancel)
7(b)/n
Customer Acquisition Cost(CAC)- CAC is the total cost of sales and marketing efforts that are needed to acquire a customer. You need to keep track of your CAC to ensure that your LTV is able to comfortably outpace it.
Customer Acquisition Cost(CAC)- CAC is the total cost of sales and marketing efforts that are needed to acquire a customer. You need to keep track of your CAC to ensure that your LTV is able to comfortably outpace it.
7(c)/n
Monthly/Annual Recurring Revenue(MRR/ARR)- MRR/ARR is the total amount of predictable revenue that a company expects on monthly/yearly bases.
Monthly/Annual Recurring Revenue(MRR/ARR)- MRR/ARR is the total amount of predictable revenue that a company expects on monthly/yearly bases.
7(d)/n
Churn Rate- Churn rate is the percentage of your customers leaving your service over a given period. It’s the nightmare statistic in the SaaS business model; even a little bit can be extremely damaging to a company’s hopes for sustaining the momentum of its growth.
Churn Rate- Churn rate is the percentage of your customers leaving your service over a given period. It’s the nightmare statistic in the SaaS business model; even a little bit can be extremely damaging to a company’s hopes for sustaining the momentum of its growth.
7(e)/n
Retention Rate- Your ability to retain customers is your foundation for growth is subscription-based services; churn is the flip side of retention, and keeping retention high is as important as keeping churn low.
Retention Rate- Your ability to retain customers is your foundation for growth is subscription-based services; churn is the flip side of retention, and keeping retention high is as important as keeping churn low.
7(f)/n
Conversion Rate- Conversion rate is the percentage of users who take the desired action. e.g. Percentage of website visitors who buy something on the site.
Conversion Rate- Conversion rate is the percentage of users who take the desired action. e.g. Percentage of website visitors who buy something on the site.
8/n
How all of this aligns with your strategy?
You’ll know you’re at the Product-Market Fit stage when you’re not just looking for people interested in your idea anymore. Now you’re looking for customers who will pay for the Minimum Viable Product you create.
How all of this aligns with your strategy?
You’ll know you’re at the Product-Market Fit stage when you’re not just looking for people interested in your idea anymore. Now you’re looking for customers who will pay for the Minimum Viable Product you create.
8(a)/n
This stage will probably involve multiple test iterations of your MVP as you figure our hot to turn your proposed value into a product that customers will pay for.
This stage will probably involve multiple test iterations of your MVP as you figure our hot to turn your proposed value into a product that customers will pay for.
8(b)/n
It is very important to start thinking about your pricing strategy at this stage so you can lay a good foundation to consistently optimize your monetization throughout the lifetime of your business.
It is very important to start thinking about your pricing strategy at this stage so you can lay a good foundation to consistently optimize your monetization throughout the lifetime of your business.
9/n
Sales Model of SaaS-
It is a general framework that defines an organization’s high-level approach to selling. Unlike a sales process, which lays out the specific steps an org. takes to turn a lead into a sale, a sales model is simply a shorthand way to describe how you sell.
Sales Model of SaaS-
It is a general framework that defines an organization’s high-level approach to selling. Unlike a sales process, which lays out the specific steps an org. takes to turn a lead into a sale, a sales model is simply a shorthand way to describe how you sell.
9(a)/n
The sales model for SaaS defines much more about a product(and company) that other distinctions, like whether a company sells to customers(B2C) or businesses(B2B). whether it is bootstrapped or funded, or what technology stack it is built on.
The sales model for SaaS defines much more about a product(and company) that other distinctions, like whether a company sells to customers(B2C) or businesses(B2B). whether it is bootstrapped or funded, or what technology stack it is built on.
9(b)/n
Low-touch SaaS sales- The perfect product(almost) sells itself. Low-touch SaaS is designed for the majority of customers to purchase it without sustained one-on-one interaction with human beings.
Low-touch SaaS sales- The perfect product(almost) sells itself. Low-touch SaaS is designed for the majority of customers to purchase it without sustained one-on-one interaction with human beings.
9(c)/n
Primary sales channels are the software’s website, email marketing, and a free trial for the software, with the trail being aggressively optimized to be very, very low-friction to start, onboard, and successfully make sustained use of the SaaS.
Primary sales channels are the software’s website, email marketing, and a free trial for the software, with the trail being aggressively optimized to be very, very low-friction to start, onboard, and successfully make sustained use of the SaaS.
9(d)/n
MRR is the most important metric for the low-touch SaaS business.
e.g- Dropbox and Slack
MRR is the most important metric for the low-touch SaaS business.
e.g- Dropbox and Slack
9(e)/n
High-touch SaaS sales- High-touch SaaS businesses are the flip side of low-touch SaaS businesses in terms of customer support. Some customers need some help in deciding whether or how to adopt certain products.
High-touch SaaS sales- High-touch SaaS businesses are the flip side of low-touch SaaS businesses in terms of customer support. Some customers need some help in deciding whether or how to adopt certain products.
9(f)/n
High-touch SaaS is designed around there being a human-intensive process to convince businesses to adopt the software, successfully operationalize it, and continue using it.
High-touch SaaS is designed around there being a human-intensive process to convince businesses to adopt the software, successfully operationalize it, and continue using it.
9(g)/n
ARR is the most important metric for high-touch businesses. Which is essentially all of the non-churned revenue of the company, minus certain non-recurring items such as one-time setup fees, consulting services, and similar.
e.g- Salesforce
ARR is the most important metric for high-touch businesses. Which is essentially all of the non-churned revenue of the company, minus certain non-recurring items such as one-time setup fees, consulting services, and similar.
e.g- Salesforce
10/n
Pricing Models of SaaS
Setting prices for your products can be tough. Set prices too high, and you miss out on valuable sales. Set them too low, and you miss out on valuable revenue.
Pricing Models of SaaS
Setting prices for your products can be tough. Set prices too high, and you miss out on valuable sales. Set them too low, and you miss out on valuable revenue.
10(a)/n
Price Model helps businesses better understand how to set the right prices for their audience and revenue goals.
SaaS Price Models-
1. Flat Rate Pricing- Single product, and a single price.
2. Usages Based Pricing- Directly relates the cost of SaaS product to its usage
Price Model helps businesses better understand how to set the right prices for their audience and revenue goals.
SaaS Price Models-
1. Flat Rate Pricing- Single product, and a single price.
2. Usages Based Pricing- Directly relates the cost of SaaS product to its usage
10(b)/n
3. Tiered Pricing Strategy- Offer multiple pages, with different combinations of features offered at different price points.
4. Per User Pricing- Single user pays a fixed monthly price; add another user and that price doubles.
3. Tiered Pricing Strategy- Offer multiple pages, with different combinations of features offered at different price points.
4. Per User Pricing- Single user pays a fixed monthly price; add another user and that price doubles.
10(c)/n
5. Freemium Business Model- Offering a free-to-use product, supplemented by additional paid packages.
5. Freemium Business Model- Offering a free-to-use product, supplemented by additional paid packages.
10(d)/n
Deep insights for a better pricing page-
1. Choose plans name which users can bucket themselves- for e.g. online book publishing service pricing plans should be titled as Hobbyist, Professional Author, Publishers instead of Bronze, Silver, or Gold.
Deep insights for a better pricing page-
1. Choose plans name which users can bucket themselves- for e.g. online book publishing service pricing plans should be titled as Hobbyist, Professional Author, Publishers instead of Bronze, Silver, or Gold.
10(e)/n
2. Charge More- One issue with attracting customers who are looking for cheapness is that they’re Pathological customers. To be avoided at all costs.
3. Customer has a question about pricing doesn’t make him price objective
4. Don’t sell unlimited anything
2. Charge More- One issue with attracting customers who are looking for cheapness is that they’re Pathological customers. To be avoided at all costs.
3. Customer has a question about pricing doesn’t make him price objective
4. Don’t sell unlimited anything
10(f)/n
5. Sales messages are for the customer not for companies- Avoid generic sales messages like “From starter plans to on-site and enterprise solutions- Choose the plan that’s best for you.”
5. Sales messages are for the customer not for companies- Avoid generic sales messages like “From starter plans to on-site and enterprise solutions- Choose the plan that’s best for you.”
10(g)/n
Nothing here promises value to the user; it’s all about mechanics which only you care about. Instead, you should reiterate it bases on your product or service.
Nothing here promises value to the user; it’s all about mechanics which only you care about. Instead, you should reiterate it bases on your product or service.
10(h)/n
6. Generous refund policies are to your advantage- Refunds do cause a short-term cashflow hit,but dissatisfied customers are a much bigger threat to your business than that cashflow hit because dissatisfaction that you don’t know about causes churn that is hard to control
6. Generous refund policies are to your advantage- Refunds do cause a short-term cashflow hit,but dissatisfied customers are a much bigger threat to your business than that cashflow hit because dissatisfaction that you don’t know about causes churn that is hard to control
10(i)/n
7. Business buy benefits, not features- If you’re operating on the B2B segment, then Instead of showing your features, you should show what value those features create for users.
7. Business buy benefits, not features- If you’re operating on the B2B segment, then Instead of showing your features, you should show what value those features create for users.
10(j)/n
8. Concierge onboarding- Offer free consulting services that are bundled in with the offering and focused on getting someone onboarded successfully; this is often called “concierge onboarding.” It offers the opportunity for businesses to sell on the value of the product.
8. Concierge onboarding- Offer free consulting services that are bundled in with the offering and focused on getting someone onboarded successfully; this is often called “concierge onboarding.” It offers the opportunity for businesses to sell on the value of the product.
11/n
SaaS Rule of 40%-
The 40% rule is that your growth rate + your profit should add up to 40%. So, if you are growing at 20%, you should be generating a profit of 20%. If you are growing at 40%, you should be generating a 0% profit. If you are growing at 50%, you can lose 10%.
SaaS Rule of 40%-
The 40% rule is that your growth rate + your profit should add up to 40%. So, if you are growing at 20%, you should be generating a profit of 20%. If you are growing at 40%, you should be generating a 0% profit. If you are growing at 50%, you can lose 10%.
11(a)/n
If you are doing better than the 40% rule, that’s awesome.
Now, the growth rate is easy in a SaaS-based business. Just do year-over-year growth rate of monthly MRR.
If you are doing better than the 40% rule, that’s awesome.
Now, the growth rate is easy in a SaaS-based business. Just do year-over-year growth rate of monthly MRR.
11(b)/n
You can do total revenue, but make sure you do MRR also to make sure you don’t have weird things going on in your GAAP accounting, especially if you have one-time services revenue in the mix.
You can do total revenue, but make sure you do MRR also to make sure you don’t have weird things going on in your GAAP accounting, especially if you have one-time services revenue in the mix.
11(c)/n
It’s always worth backtesting this with YoY growth of gross margin just to make sure your COGS are scaling appropriately with your revenue growth, regardless of whether you are on AWS, another cloud provider, or running bare metal in data centers.
It’s always worth backtesting this with YoY growth of gross margin just to make sure your COGS are scaling appropriately with your revenue growth, regardless of whether you are on AWS, another cloud provider, or running bare metal in data centers.
12/n
Revenue Streams for SaaS businesses
1. Subscription
2. Upsells
3. Affiliate Sales
4. APIs
5. White Label Licensing
6. Setup Fees
7. Advertising
Revenue Streams for SaaS businesses
1. Subscription
2. Upsells
3. Affiliate Sales
4. APIs
5. White Label Licensing
6. Setup Fees
7. Advertising
n/n
So this is what we have for this thread, Thank you for reading and I hope you enjoyed it.
Also, if you want Knowledge Bricks on your WhatsApp, you can join the group.
https://bit.ly/3iCRaoY ">https://bit.ly/3iCRaoY&q...
So this is what we have for this thread, Thank you for reading and I hope you enjoyed it.
Also, if you want Knowledge Bricks on your WhatsApp, you can join the group.
https://bit.ly/3iCRaoY ">https://bit.ly/3iCRaoY&q...