What is the right price? Are you charging too high leading to fiction in conversion, long sales cycles thereby reducing the revenue velocity? You need to closely examine if the extra per deal is worth it in terms of the friction it adds to the sales process.
Looking around for attributes while building great Saas teams I came across this post by Brad Feld (Oct 2017). He writes about a Keynote by Scot Dorsey the founder of ExactTarget (sold to SalesForce for $2.5Bn in 2013) and currently the Managing Partner of High Alpha, a venture studio for next generation Enterprise Cloud companies.
Jason Cohen, the CTO and co-founder of WP Engine wrote a very interesting POV on “The Unprofitable Saas Business Model Trap” exactly about 6 years ago. Now you will think that articles written so long back must have lost relevance – but surprisingly for SAAS startups there is a lot to mull over.
Jason Lemkin, Founder SaaStr in a recent Q&A addressed this question. The pro for the selling organisation is obvious. Predictable revenue – irrespective of usage. But is it sustainable and will users continue to pay based on this model? He raises important questions like : “….
- Can’t a customer pay in part based on usage, if they want to?
- Does my price automatically go up, even if I just add 1 or 2 users to my account?
- Does every type of user “cost money”?
- Do I have to figure out now how many users I need for the best pricing, when I don’t really know? “
At Collision, one of the largest tech conferences in the world which shifted its latest version to Toronto, Des Traynor, C0 Founder Intercom – focused on Retention being more important than conversion. This resonates with me because we have been talking about “Buying is the new Selling” for a while and it sort of dovetails into this major shift happening in today’s transaction ecosystem. Traynor reiterates some known points and makes some new connections :
This is one interesting analysis by Fred Wilson in his AVC column posted in 2017. What burn rate is acceptable and sustainable? Understandably the discussion with founders and boards could be emotional at best when discussing burn rate. All companies and their backers want to get to the Unicorn status as soon as possible and no spend is enough to get there.
Tomasz Tunguz is the one you turn to for analysis when watershed events happen. Salesforce Tableau acquisition is one such event in a string of similar ones (although the most expensive by value by far) playing out this month. It follows Google’s Looker acquisition and Sisense’s acquisition of Periscope Data.
Like my post yesterday about the must have strategic plan which is simple and easily measurable, I found a 2013 post by David Cummings on SAAS Metrics dashboard. With all the discussions I have with SAAS founders, it is the rare ones who had these numbers on their finger tips or those who are measuring them at least on a monthly cadence.