As more and more businesses warm up to cloud-based services, the software-as-a-service industry continues to grow fast. By 2015, for the first time, more than 50 percent of customer-relationship management deployments will be deployed as SaaS, and that by 2025 that number will surpass 80 percent.
Offer several packages
The entry-point SaaS offering should almost always be free, but limited in usage volume, functionality and/or time. It is recommended to then offer two to three paid packages fitted to different customer segments with different usability, ROI and willingness to pay.
Define, measure, analyze, improve, control
In their actions, SaaS users share with us invaluable information about their use of our products, and their needs and behavior. Data reveals what functionalities are popular or aren’t being used (and should therefore potentially be omitted per the KISS principle), and also helps to segment users and define packages. It’s important to continuously define tests (wherever possible with A/B testing) and monitor the effective improvement after making changes.
Cultivate an ecosystem
Successful products are wrapped with open and flexible APIs that enable easy integration with third-party software. The better ones also amass around them a community of developers, and/or offer a plugin marketplace that enables the development and promotion of third-party plugins. Interoperability increases the value of the product, and also introduces an ancillary source of revenue from referrals, resale opportunities and equipment manufacturer deals.
Offer the right amount of professional services
Professional services typically make up for between 10 to 20 percent of new annual contract value (ACV), and their gross margin is typically 20 percent (vs. 80 percent for the recurring revenue). These proportions usually add up to a blended gross margin greater than 70 percent, which is an important threshold for maintaining good valuation multiples.
Monitor your dashboard
SaaS companies need to constantly monitor their key performance indicators (KPIs). The most important measurements are monthly recurring revenues (MRR), churn rate, cash flow, customer acquisition cost ratio, customer lifetime value, ACV/MRR pipeline and average ACV/MRR per salesperson.