{"id":2371,"date":"2019-07-16T12:23:56","date_gmt":"2019-07-16T06:53:56","guid":{"rendered":"https:\/\/pitch.link\/blog\/?p=2371"},"modified":"2019-08-12T12:49:34","modified_gmt":"2019-08-12T07:19:34","slug":"rethink-your-saas-business-model","status":"publish","type":"post","link":"https:\/\/pitch.link\/blog\/rethink-your-saas-business-model\/","title":{"rendered":"Rethink your SAAS Business Model"},"content":{"rendered":"\n

Jason Cohen, the CTO and co-founder of WP Engine wrote a very interesting POV on \u201cThe Unprofitable Saas Business Model Trap\u201d 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.\u00a0<\/p>\n\n\n\n\n\n\n\n

Although the jive at Marketo (the trigger for the article was the Marketo IPO filings and related data) could have been premature as Adobe acquired Marketo for $4.75B this year, the points made are lesson for all SAAS founders. <\/p>\n\n\n\n

Essentially Jason Cohen questions the very basic assumptions that typically is referred even today :<\/p>\n\n\n\n

  1. CAC should be recoverable in a period of time ( he refers to 18 months; arguably today a better benchmark is 12 months) <\/li>
  2. Growing a company by paying for acquiring customers will pile on more and more unprofitable operations. <\/li>
  3. So the notion that a company can remain unprofitable as long as the growth (rate) is healthy(?) is questionable.<\/li><\/ol>\n\n\n\n
    \"SAAS
    Photo by Joshua Ness on Unsplash<\/figcaption><\/figure><\/div>\n\n\n\n

    According to Cohen, the accepted Saas business model doesn\u2019t make sense. Here is why –\u00a0<\/p>\n\n\n\n

    The combination of 18 months pay back of CAC, with 75% retention and 30% cost to serve (arguably this has also come down significantly with the proliferation and rising competition in cloud services) and 15% each for R&D and G&A the real profit (even with a GPM of 70%) could be as low as 0.1 of annual revenue. <\/p>\n\n\n\n

    The solution :<\/p>\n\n\n\n

    1. Manage Cancellations \/ churn through upsell\/upgrades.<\/li>
    2. Use viral growth to reduce cost of acquisition.<\/li>
    3. Increase GPM<\/li>
    4. Build in a service \/ consulting component to increase stickiness.<\/li><\/ol>\n\n\n\n

      The fourth point is from the lively discussion that follows and I strongly recommend you read those. <\/p>\n\n\n\n

      Where I learnt it #197<\/strong><\/p>\n\n\n\n

      Link to article by Jason Cohen – https:\/\/blog.asmartbear.com\/unprofitable-saas-business-model.html<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

      Jason Cohen, the CTO and co-founder of WP Engine wrote a very interesting POV on \u201cThe Unprofitable Saas Business Model Trap\u201d 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.\u00a0<\/p>\n<\/p>

      Continue Reading<\/span><\/i><\/a><\/div>","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"inline_featured_image":false,"ub_ctt_via":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[68,69],"tags":[70,78,184],"class_list":["post-2371","post","type-post","status-publish","format-standard","hentry","category-saas","category-what-i-learnt-today","tag-alwayslearning","tag-saas","tag-businessmodels"],"aioseo_notices":[],"featured_image_src":null,"author_info":{"display_name":"Subhanjan Sarkar","author_link":"https:\/\/pitch.link\/blog\/author\/subhanjan\/"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/paX7jg-Cf","_links":{"self":[{"href":"https:\/\/pitch.link\/blog\/wp-json\/wp\/v2\/posts\/2371"}],"collection":[{"href":"https:\/\/pitch.link\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/pitch.link\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/pitch.link\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/pitch.link\/blog\/wp-json\/wp\/v2\/comments?post=2371"}],"version-history":[{"count":0,"href":"https:\/\/pitch.link\/blog\/wp-json\/wp\/v2\/posts\/2371\/revisions"}],"wp:attachment":[{"href":"https:\/\/pitch.link\/blog\/wp-json\/wp\/v2\/media?parent=2371"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/pitch.link\/blog\/wp-json\/wp\/v2\/categories?post=2371"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pitch.link\/blog\/wp-json\/wp\/v2\/tags?post=2371"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}