Archive for the 'saas' Category

SaaS Business Planning

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If you’re starting a SaaS business, it’s a good idea to start your business plan with a template.  This template provides a lot of useful tools to help you plan out your SaaS business idea.

http://www.software-marketing-advisor.com/software-development-business-plan-2.html

 

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Avoiding SaaS Customer Churn

Today’s VentureBeat guest post by Vishal Sankhla covers the topic of how to keep customer churn low in the SaaS business model. I definitely recommend checking out the article “The SaaS Churn Challenge: How to Hold Onto Your Customers”.

The crux of the issue is that in the SaaS business model, you invest up-front to acquire each customer, but you only get positive ROI from that customer if the customer lifetime value is high enough. In other words, you are counting on customers staying customers for longer than a few subscription periods. If your churn is too high, then you never make enough off each customer to cover the acquisition costs. That is a losing proposition for any SaaS business! The key is finding ways to maintain customer support and interaction while keeping those costs down.

Quest Software SaaS Case Study

Check out this new case study on Quest Software’s transition from being a licensed software company to a SaaS firm. You have to have Gartner registration to access it, but if you do you can find the case study at www.gartner.com.

Quest moved to a SaaS-based log management offering. Their SaaS case study shows how significant the impact of moving to SaaS can be across the entire software business.

If you can’t access the Gartner case study, Microsoft also published their own case study about Quest Software’s move to SaaS earlier this year.

They’re both worth a read, if you’re a software company considering the move to a Cloud solution. For additional reading, check out this article about the important considerations when moving to a SaaS business model.

Some Recent Software Marketing Articles

Here’s a quick summary of a few recent articles and blog posts worth reading, covering topics from influencing the B2B buy cycle, SaaS sales compensation, and what works in online marketing:

Selling B2B software? Even if you sell to the enterprise, the fact is that B2B purchasers gather a lot of their initial research on potential solutions online. That’s why having an internet marketing strategy (inbound marketing) is so key. Take a look at this recent article on ChiefMarketer.com about “Adjusting to the Web-Influenced Buy Cycle.”

If you’re moving to an enterprise SaaS model, then how to update your sales compensation plan might be on your mind. In that case, this recent blog post by Joel York at Chaotic Flow on “SaaS Sales Compensation Made Easy” may come in handy. Just remember that for SaaS you really need to focus on keeping customer acquisition costs (including costly sales comp) as low as possible – only use direct sales force when you really need it.

You can check out this recent survey by Go-to-Market Strategies on what worked & what didn’t in online marketing in 2009, in their report “Online Marketing Trends: What Worked in 2009 and What to Expect in 2010”. They found the best bets were email marketing and optimized websites, followed by social media tools.

Update your Business Plan for the New Decade

New Year start business planning It’s now 2010… do you have an updated business plan or marketing plan to address the new decade?

If you’re a software company, the industry is changing with the move to SaaS, outsourcing and other trends. It’s important to make sure you have a current business plan to make sure you’re positioned to take optimal advantage of these changes.

Take advantage of our SaaS business plan template, or the Software Company business plan template, and get started optimizing your business today!

The Changing Enterprise Software Model

Yesterday, a panel of software leaders discussed the direction of the enterprise software model at the InformationWeek 500 conference. You can read about it here.

The panelists agreed that the enterprise software model is making the shift toward SaaS rather than on-premise application deployments. This is dramatically impacting software sales cycles as I wrote about before, with processes that previously took weeks or months now taking less than a day.

Clearly, SaaS is the wave of the future for greenfield applications and enterprise solutions. But for most enterprise deployments, there’s a legacy infrastructure and business process to contend with. In many cases, that legacy will dictate an on-premise solution as the only realistic near-term model. And in cases where the legacy infrastructure can be transitioned or integrated with a SaaS solution, that integration will in many cases take significant time, cost and resources. This is going to create (and is creating) new business opportunities for vendors and service providers alike.

Read more about the software market transition to SaaS here.

Procrastinating Your SaaS Business Plan? Five Reasons to Get It Done!

Our latest article, “SaaS Business Plan Tips,” on Software Marketing Advisor is about SaaS business planning… how critically important having a solid business plan is for software-as-a-service providers.

You may ask: why should I write down a lengthy business plan? Sure, there are too many things to do already when you’re trying to start or grow a business, and often business planning does not seem as critical as the other urgent calls on your time.

SaaS companies should not make that mistake… Here’s a quick summary of the top 5 reasons why you need to write that SaaS business plan now:

  1. SaaS involves selling and delivering a standardized solution that solves a customer need broadly without too much expensive customization. Getting that right requires up-front planning: there’s little opportunity to customize during the sales cycle or during installation and still make money.
  2. SaaS usually requires more up-front capital than a more traditional software startup. That means investors are going to be looking more closely at that SaaS business plan and financial projections.
  3. Because it is newer, the SaaS business model is less proven, requiring more ongoing analysis and adjustment as the industry matures. It’s hard to determine which assumptions worked and which didn’t if you don’t write it down.
  4. One of the most important SaaS metrics is low customer acquisition costs. Without a SaaS business plan, it is too easy to over-invest in lead generation or focus on the wrong leads, leading to unsustainable marketing and sales costs.
  5. There is additional complexity to SaaS business metrics that necessitates an ongoing plan to forecast and track them reliably. It is not sufficient to simply forecast and track quarterly bookings, as with licensed software.

So stop procrastinating… and start writing your business plan! This SaaS business plan template can be a useful place to start.

Isn’t SaaS Just Like Any Other Services Business?

In my last post I wrote about the key SaaS metrics:

  • Customer Monthly Recurring Revenue (CMRR),
  • Churn,
  • Cash Flow,
  • Customer Acquisition Cost (CAC), and
  • Customer LifeTime Value (CLTV).

It’s a big leap for a software business to go from thinking about Bookings as their main metric… to now these more services-based metrics.

Then that got me thinking… Aren’t these just the exact same metrics that apply to all subscription services businesses?

What about your local health club… that’s a subscription services business. I can’t say I’m an expert in the health club industry… but I bet they also track CMRR, Churn, Cash Flow, CAC and CLTV pretty closely. And similarly Bookings really aren’t what matters: who cares if you signed up 100 new members to the gym this month, if you also lost 150 member who didn’t resubscribe.

If you’re planning a SaaS business, but have more of a software/technology business background… then it might be a good idea to understand a little more about how these other service subscription businesses are run and managed. Come to think of it, I think I will too!

There just might be some really good lessons to be learned…

Ten Laws for SaaS Success

Want to know what SaaS metrics to use to be successful at Software-as-a-Service (SaaS)? I highly recommend this presentation by venture capitalist firm Bessemer Partners. From last fall… but still just as valid. Maybe more so as customer adoption of SaaS is really heating up compared to other software industry segments.

Here are the ten laws for SaaS metrics of success:

  1. The key monthly SaaS metrics are CMRR (Customer Monthly Recurring Revenue), Churn and Cash flow. Bookings are not a valid metric.
  2. The best indicators of long-term business health are Customer Acquisition Cost (CAC) and Customer LifeTime Value (CLTV).
  3. Tune the business before scaling it. Make sure you’re tracking to the SaaS metrics first. Keep sales team small and focus on each making >$100K CMRR.
  4. Pay sales people on CMRR not bookings.
  5. The most important channels are business service ones, not the traditional IT channels.
  6. Focus your marketing online, which is where your customers are and costs are lower.
  7. Keep your business local first.
  8. Focus: keep a single code version in production, support multi-tenant, and don’t do on-premise software also.
  9. “Service” is the most important element of SaaS.
  10. SaaS companies will need capital to last them 4 years – invest upfront in R&D and sales.

I think these are all really important points… ones to fully take to heart if you are trying to build a SaaS company.

The most critical mindset shift is #9: you are running a service business, not a software one. That means a fundamental change in culture and focus throughout the business.

#8 is important too – and one that needs planning out up-front before you sign up your first customers. The more profitable services long-term may be add-on services built on the value you can provide through aggregated data analysis. So think that through as you design your architecture, finalize customer contracts, and plan implementations.

If you need a SaaS business plan template that includes these SaaS metrics then take a look at our recently updated SaaS business planning package here.


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